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Does Government-Restricted Entry Produce Market Power?: New Evidence from the Market for Television Advertising

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  • Gary M. Fournier
  • Donald L. Martin

Abstract

This article examines the premise that television broadcasters are able to exercise substantial market power deriving from governmental restrictions on entry. Using a new sample of actual transactions prices, we estimate a hedonic equation identifying product quality components of advertising spots. The model demonstrates the significant effect on prices of uncertainty in audience delivery, on the basis of observed expectations of the buyer and seller. Previous empirical work on advertising markets neglected these transactional elements. Thus, once the relevant features of transactions are included in the analysis, prices appear to be unrelated to measures associated with market power.

Suggested Citation

  • Gary M. Fournier & Donald L. Martin, 1983. "Does Government-Restricted Entry Produce Market Power?: New Evidence from the Market for Television Advertising," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 44-56, Spring.
    • Handle: RePEc:rje:bellje:v:14:y:1983:i:spring:p:44-56
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    Cited by:

    1. Sylvia Hristakeva & Julie Holland Mortimer, 2023. "Price Dispersion and Legacy Discounts in the National Television Advertising Market," Marketing Science, INFORMS, vol. 42(6), pages 1162-1183, November.
    2. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    3. Yong Liu & Daniel Putler & Charles Weinberg, 2006. "The welfare and equity implications of competition in television broadcasting: the role of viewer tastes," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(2), pages 127-140, September.

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