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Media Economics: theory directions

Media Economics: theory directions. Simon P. Anderson University of Virginia Round Table Discussion. Scope. Modeling 2 sided media markets interactions (other issues: bias, …) Multi-homing Strategic variables Targeting Need to fill out “the matrix”

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Media Economics: theory directions

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  1. Media Economics: theory directions Simon P. Anderson University of Virginia Round Table Discussion

  2. Scope • Modeling 2 sided media markets interactions • (other issues: bias, …) • Multi-homing • Strategic variables • Targeting • Need to fill out “the matrix” • [comments welcome on posted paper with Foros, Kind, Peitz]

  3. Importance • Model predictions, hence policy prescriptions, are sensitive to assumptions • Merger analysis in 2SM • Laxer allowance (Bush) on media ownership caps

  4. Start - point • AC (RES, 2005): monopoly bottle-neck through single-homing viewers assumption • Entry: ad levels fall, prices per viewer rise • Mergers: opposite • Public broadcaster (objectives??)

  5. Fox News Entry

  6. Equilibrium concept • Ads; price/ad/viewer; price per ad; more ornate tariff structure (Weyl-White) • Makes a big difference • How it really happens, bargaining • Other market participants – Madison Avenue, local cable providers, content producers …

  7. “multi-homing” or “single-homing” • Endogenous! • Advertisers – on one or several platforms? • Viewers/ surfers / readers / listeners, ditto [AFK: vertical/horizontal differentiation] • Difference it makes? – can depend on “strategic variable” too! • Illustration: AC vs. AR;

  8. Distilled version of Ambrus-Reisinger(Anderson Foros Kind 2011) • rc common; rj exclusive viewers, • Fixed number of homogenous advertisers, wtpb per (unique) viewer • Then equilibrium ad pricing has multi-homing advertisers paying brj for an ad on outlet j • Incremental Pricing Principle • [Venn diagrams]

  9. Entry • After 3 enters, 1’s profit goes down from b(r1+r13) to br1 • Ad price goes down r1 r12 r2 r123 r23 r13 r3

  10. Merger • Before merger, ad prices are br1 and br2 • After merger, total price for putting ad on both channels is higher: b(r1+ rc+ r2) rc r1 r2

  11. targeting • Matters – happens! • Reduces paying for wasted eyeballs • Better matching may increase prices; platform may want to temper this (de Corniere, Bruestle) by imperfectly serving matches • Athey, Calvano, Gans on different degrees of targeting • Privacy concerns

  12. Different models for different media • ACG, AFKP • TV – timing • Mags – can “watch” simultaneously • www intermediate • Subscription prices

  13. Further dimensions to competition • Not just prices of ads, ad clutter, and subscription fees • Genre competition / program type • Quality • Variety in long run • Merger incentives / multi-channel platforms • Role of public broadcasters, non-profits

  14. Conclusions • Need to get it right! • Model endogenous “homing” choice; integrative models of heterogeneity on both sides and homing choice (AFK) • What we need from empirical studies: effects of entry, effects of mergers, on broad set of variables

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