Tore Nilssen - Academia.edu (original) (raw)
Papers by Tore Nilssen
Journal of Industry, Competition and Trade
Journal of Media Economics, Jan 1, 2007
We consider a model of a TV oligopoly where TV channels transmit advertising and viewers dislike ... more We consider a model of a TV oligopoly where TV channels transmit advertising and viewers dislike such commercials. We show that advertisers make a lower profit the larger the number of TV channels. If TV channels are sufficiently close substitutes, there will be underprovision of advertising relative to social optimum. We also find that the more viewers dislike ads, the more likely it is that welfare is increasing in the number of advertising financed TV channels. A publicly owned TV channel can partly correct market distortions, in some cases by having a larger amount of advertising than private TV channels. It may even have advertising in cases where advertising is wasteful per se.
The purpose of this article is to analyze how competitive forces may influence the way media firm... more The purpose of this article is to analyze how competitive forces may influence the way media firms like TV channels raise revenue. A media firm can either be financed by advertising revenue, by direct payment from the viewers (or the readers, if we consider newspapers), or by both. We show that the scope for raising revenues from consumer payment is constrained by other media firms offering close substitutes. This implies that the less differentiated the media firms' content, the larger is the fraction of their revenue coming from advertising. A media firm's scope for raising revenues from ads, on the other hand, is constrained by how many competitors it faces. We should thus expect that direct payment from the media consumers becomes more important the larger the number of competing media products.
This paper presents a model of media competition in a situation where the media are advertising-f... more This paper presents a model of media competition in a situation where the media are advertising-financed, but where the media consumers dislike the advertising. It is shown that the equilibrium prices of advertising are actually higher, and the profit levels lower, the less differentiated the medias are perceived to be. We apply the model to analyze the incentives for Internet portals to form alliances with their advertisers, and find that there exists a prisoners' dilemma where portals that are close substitutes end up in an equilibrium with no vertical alliances and low profit.
CESifo Working Paper Series No. …, Jan 1, 2010
The TV industry is a two-sided market where both advertisers and viewers buy access to the progra... more The TV industry is a two-sided market where both advertisers and viewers buy access to the programs offered by competing TV channels. Under the current market structure advertising prices are typically set by TV channels while viewer prices are set by distributors (e.g. cable operators). The latter implies that the distributors partly internalize the competition between the TV channels, since they take into account the fact that a lower viewer price at one channel will harm rival channels. We nonetheless find that a shift to a market structure where both advertising prices and viewer prices are set competitively by the TV channels might increase joint industry profits. The reason is that this market structure, in contrast to the one we observe today, directly addresses the two-sidedness of the market. We also show that this is to the benefit for the viewers. JEL-Code: D40, D62, L10, L82.
… Paper, Norwegian School of Economics and …, Jan 1, 2003
We consider a model where TV channels transmit advertising, and viewers dislike such commercials.... more We consider a model where TV channels transmit advertising, and viewers dislike such commercials. We find that the less differentiated the TV channels' programs are, the lower is the amount of advertising in equilibrium. Relative to the social optimum, there is underprovision of advertising if TV channels are sufficiently close substitutes. A dampening-of-competition merger between TV channels may improve welfare and lead to more advertising. But even after a merger there can be underprovision of advertising. A publicly owned TV channel can partly correct market distortions, in some cases by having a larger amount of advertising than a private TV channel. It may actually have advertising even in cases where it is wasteful per se.
Topics in Economic Analysis & Policy, 2000
This paper presents a model of competition between two advertisingfinanced media firms, and we ap... more This paper presents a model of competition between two advertisingfinanced media firms, and we apply the model to analyze competition between portals on the Internet. First, we show that equilibrium prices of advertising are actually higher the less differentiated the portals are perceived to be. Second, we show that aggregate profit for the portals increases if they form each their vertical alliance with advertisers. This is true even if there is perfect competition between the advertisers for advertising space. However, we also demonstrate that it may be individually profitable for one of the portals not to form a vertical alliance if the portals are close substitutes. In that case we end up with an asymmetric equilibrium with only one vertical alliance. This happens despite the fact that aggregate profit would be higher with two vertical alliances.
SSRN Electronic Journal, 2000
Journal of Industry, Competition and Trade
Journal of Media Economics, Jan 1, 2007
We consider a model of a TV oligopoly where TV channels transmit advertising and viewers dislike ... more We consider a model of a TV oligopoly where TV channels transmit advertising and viewers dislike such commercials. We show that advertisers make a lower profit the larger the number of TV channels. If TV channels are sufficiently close substitutes, there will be underprovision of advertising relative to social optimum. We also find that the more viewers dislike ads, the more likely it is that welfare is increasing in the number of advertising financed TV channels. A publicly owned TV channel can partly correct market distortions, in some cases by having a larger amount of advertising than private TV channels. It may even have advertising in cases where advertising is wasteful per se.
The purpose of this article is to analyze how competitive forces may influence the way media firm... more The purpose of this article is to analyze how competitive forces may influence the way media firms like TV channels raise revenue. A media firm can either be financed by advertising revenue, by direct payment from the viewers (or the readers, if we consider newspapers), or by both. We show that the scope for raising revenues from consumer payment is constrained by other media firms offering close substitutes. This implies that the less differentiated the media firms' content, the larger is the fraction of their revenue coming from advertising. A media firm's scope for raising revenues from ads, on the other hand, is constrained by how many competitors it faces. We should thus expect that direct payment from the media consumers becomes more important the larger the number of competing media products.
This paper presents a model of media competition in a situation where the media are advertising-f... more This paper presents a model of media competition in a situation where the media are advertising-financed, but where the media consumers dislike the advertising. It is shown that the equilibrium prices of advertising are actually higher, and the profit levels lower, the less differentiated the medias are perceived to be. We apply the model to analyze the incentives for Internet portals to form alliances with their advertisers, and find that there exists a prisoners' dilemma where portals that are close substitutes end up in an equilibrium with no vertical alliances and low profit.
CESifo Working Paper Series No. …, Jan 1, 2010
The TV industry is a two-sided market where both advertisers and viewers buy access to the progra... more The TV industry is a two-sided market where both advertisers and viewers buy access to the programs offered by competing TV channels. Under the current market structure advertising prices are typically set by TV channels while viewer prices are set by distributors (e.g. cable operators). The latter implies that the distributors partly internalize the competition between the TV channels, since they take into account the fact that a lower viewer price at one channel will harm rival channels. We nonetheless find that a shift to a market structure where both advertising prices and viewer prices are set competitively by the TV channels might increase joint industry profits. The reason is that this market structure, in contrast to the one we observe today, directly addresses the two-sidedness of the market. We also show that this is to the benefit for the viewers. JEL-Code: D40, D62, L10, L82.
… Paper, Norwegian School of Economics and …, Jan 1, 2003
We consider a model where TV channels transmit advertising, and viewers dislike such commercials.... more We consider a model where TV channels transmit advertising, and viewers dislike such commercials. We find that the less differentiated the TV channels' programs are, the lower is the amount of advertising in equilibrium. Relative to the social optimum, there is underprovision of advertising if TV channels are sufficiently close substitutes. A dampening-of-competition merger between TV channels may improve welfare and lead to more advertising. But even after a merger there can be underprovision of advertising. A publicly owned TV channel can partly correct market distortions, in some cases by having a larger amount of advertising than a private TV channel. It may actually have advertising even in cases where it is wasteful per se.
Topics in Economic Analysis & Policy, 2000
This paper presents a model of competition between two advertisingfinanced media firms, and we ap... more This paper presents a model of competition between two advertisingfinanced media firms, and we apply the model to analyze competition between portals on the Internet. First, we show that equilibrium prices of advertising are actually higher the less differentiated the portals are perceived to be. Second, we show that aggregate profit for the portals increases if they form each their vertical alliance with advertisers. This is true even if there is perfect competition between the advertisers for advertising space. However, we also demonstrate that it may be individually profitable for one of the portals not to form a vertical alliance if the portals are close substitutes. In that case we end up with an asymmetric equilibrium with only one vertical alliance. This happens despite the fact that aggregate profit would be higher with two vertical alliances.
SSRN Electronic Journal, 2000