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The Market for Television Advertising: Model and Evidence

Author

Listed:
  • Robert Kieschnick

    (University of Texas at Dallas)

  • B. McCullough

    (Drexel University)

  • Steven Wildman

    (Michigan State University)

Abstract

We provide a model of television advertising based on an explicit characterization of an advertisement's contribution to an advertiser's profits that suggests that each program faces a downward sloping demand for its ad time. Hence Fournier and Martin's (1983) "law of one price" does not hold in our model. We study these contrasting arguments about television advertising by examining the pricing of broadcast network advertising. In conducting this empirical examination we encounter and solve a severe multicollinearity problem. We conclude that the evidence supports the advertising model presented in this paper and demonstrates segmentation between cable and broadcast viewers in the national television advertising market.

Suggested Citation

  • Robert Kieschnick & B. McCullough & Steven Wildman, 2001. "The Market for Television Advertising: Model and Evidence," Review of Marketing Science Working Papers 1-2-1015, Berkeley Electronic Press.
    • Handle: RePEc:bep:rmswpp:1-2-1015
    Note: oai:bepress:roms-1015
    as

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    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    2. Peter O. Steiner, 1952. "Program Patterns and Preferences, and the Workability of Competition in Radio Broadcasting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(2), pages 194-223.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
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    Cited by:

    1. Gomes, Orlando, 2006. "The dynamics of television advertising with boundedly rational consumers," MPRA Paper 2847, University Library of Munich, Germany.

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