Working Paper: CEPR ID: DP10762
Authors: Marc Ivaldi; Jiekai Zhang
Abstract: This paper investigates empirically the advertising competition in the French free TV broadcasting industry in a two-sided framework. We specify a structural model of oligopoly competition of free TVs, and identify the shape and magnitude of the feedback loop between the TV viewers and the advertisers using French market data from March 2008 to December 2013. We contribute to the literature by implementing a simple procedure to test the conduct of TV channels, and identify that the nature of competition is of Cournot type on the French TV advertising market. In line with a decision of French anti-trust authority in 2010 which authorized the acquisition of two free broadcasting TV channels by a big media group under behavioral remedies, a series of competitive analysis has been conducted: We fi nd fi rstly that the surpls of TV viewers keep raising after the decision of acquisition, suggesting that the implemented policy has been efficient in protecting the consumer surplus; Then, we fi nd, by counterfactual simulation, that the merger of advertising agencies would not affect importantly the equilibrium outcomes in this industry, due to the strong network externalities between the TV viewers and the advertisers.
Keywords: advertising; behavioral remedies; competition; market conduct; media; TV; two-sided market
JEL Codes: D22; D43; K21; L11; L13; L22; L41; M37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased market share of TF1 (F62) | Increased pricing power (D49) |
| Behavioral remedies (C92) | Prevention of competitive harm to consumers (L49) |
| Merger of advertising agencies (M38) | Impact on equilibrium outcomes (D59) |
| Acquisition of TMC and NT1 by TF1 group (G34) | Rise in surplus of TV viewers (F62) |
| Increase in advertising quantity (M37) | Decrease in audience size (R12) |