IDEAS home Printed from https://ideas.repec.org/a/prg/jnlpep/v2002y2002i4id202.html
   My bibliography  Save this article

Optimal timing of tv commercials: symmetrical model

Author

Listed:
  • Tomáš Kadlec

Abstract

In this paper I study the behavior of two TV broadcasters on a market where viewers perpetually make a decision whether to watch TV and which TV channel to watch. Both broadcasters optimally allocate time periods where their TV program is replaced by advertising. While TV programs represent broadcaster's costs, commercials bring in revenue that is proportional to the audience reach. I assume that viewers choose among products and the outside option following a Markov process where probabilities of transition reflect various attractiveness of the products. Given symmetrical positions of the broadcasters, I prove that their optimal strategy is to put their commercial breaks into the same or very close times. In the case when commercials overlap perfectly, both broadcasters are better off if they fragment their breaks into shorter breaks keeping the total amount of commercial time the same.

Suggested Citation

  • Tomáš Kadlec, 2002. "Optimal timing of tv commercials: symmetrical model," Prague Economic Papers, Prague University of Economics and Business, vol. 2002(4), pages 356-369.
    • Handle: RePEc:prg:jnlpep:v:2002:y:2002:i:4:id:202
    DOI: 10.18267/j.pep.202
    as

    Download full text from publisher

    File URL: http://pep.vse.cz/doi/10.18267/j.pep.202.html
    Download Restriction: free of charge
    File URL: http://pep.vse.cz/doi/10.18267/j.pep.202.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.pep.202?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Peterman, John L, 1971. "Concentration of Control and the Price of Television Time," American Economic Review, American Economic Association, vol. 61(2), pages 74-80, May.
    2. Simon P. Anderson & Stephen Coate, 2000. "Market Provision of Public Goods: The Case of Broadcasting," NBER Working Papers 7513, National Bureau of Economic Research, Inc.
    3. Jean Gabszewicz & Didier Laussel & Nathalie Sonnac, 1999. "TV-Broadcasting Competition and Advertising," Working Papers 99-72, Center for Research in Economics and Statistics.
    4. Gil S. Epstein, 1998. "Network Competition and the Timing of Commercials," Management Science, INFORMS, vol. 44(3), pages 370-387, March.
    5. Hendry, David F., 1992. "An econometric analysis of TV advertising expenditure in the United Kingdom," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 281-311, June.
    6. Michael Spence & Bruce Owen, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 103-126.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tomas Kadlec, 2002. "Optimal Timing of TV Commercials: Symmetrical Model," CERGE-EI Working Papers wp195, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    3. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    4. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
    5. Nilssen, Tore & Sørgard, Lars, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series qt2zp943hj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    6. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, vol. 15(3), pages 305-315, September.
    7. Man-Lui Lau & Bruce Wydick, 2014. "Does New Information Technology Lower Media Quality? The Paradox of Commercial Public Goods," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 145-157, June.
    8. Barros Pedro P & Kind Hans Jarle & Nilssen Tore & Sørgard Lars, 2005. "Media Competition on the Internet," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-20, January.
    9. Allan Brown & Martin Cave, 1992. "The Economics of Television Regulation: A Survey with Application to Australia," The Economic Record, The Economic Society of Australia, vol. 68(4), pages 377-394, December.
    10. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
    11. Brown, Keith & Alexander, Peter J., 2005. "Market structure, viewer welfare, and advertising rates in local broadcast television markets," Economics Letters, Elsevier, vol. 86(3), pages 331-337, March.
    12. Roberto Roson, 2008. "Price Discrimination and Audience Composition in Advertising-Based Broadcasting," Journal of Media Economics, Taylor & Francis Journals, vol. 21(4), pages 234-257.
    13. Felix Oberholzer-Gee & Joel Waldfogel, 2001. "Electoral Acceleration: The Effect of Minority Population on Minority Voter Turnout," NBER Working Papers 8252, National Bureau of Economic Research, Inc.
    14. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2010. "Price Coordination in Two-Sided Markets: Competition in the TV Industry," CESifo Working Paper Series 3004, CESifo.
    15. Kevin M. Murphy & Ignacio Palacios-Huerta, 2016. "A Theory of Bundling Advertisements in Media Markets," NBER Working Papers 22994, National Bureau of Economic Research, Inc.
    16. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
    17. Nilssen,T. & Sorgard,L., 2001. "Who are the advertisers?," Memorandum 19/2001, Oslo University, Department of Economics.
    18. Christian Jansen, 2003. "Convergence and the Potential Ban on Interactive Product Placement in Germany," Law and Economics 0302002, University Library of Munich, Germany.
    19. Feng Zhu, 2008. "Ad-sponsored Business Models and Compatibility Incentives of Social Networks," Working Papers 08-20, NET Institute, revised Sep 2008.
    20. Susanne Kremhelmer & Hans Zenger, 2004. "Advertising and the Media," Industrial Organization 0403003, University Library of Munich, Germany.

    More about this item

    Keywords

    TV commercials; optimal timing; broadcasting; coordination; Markov process;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlpep:v:2002:y:2002:i:4:id:202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.