Working Paper: NBER ID: w22994
Authors: Kevin M. Murphy; Ignacio Palacios-Huerta
Abstract: Watching TV and other forms of media consumption represent, after sleeping and working, the main activity that adults perform in developed countries. We present a dynamic theory of commercial broadcasting where the media trade utility-raising goods (programs, information, and services) with audiences in exchange for their exposure to advertisements (utility-decreasing bads), and where goods are otherwise free to the audience except for their opportunity cost of time. Goods and bads are dynamically arranged, and as such traded in an intertemporal bundle. No monetary transfers take place between media and audiences, and this barter exchange is not contractually sustained. We study this dynamic problem in a model that captures the central characteristics of how commercial media markets operate. The model is rich enough to account for a variety of disparate evidence in television, radio, print media and the web.
Keywords: advertising; media markets; consumer theory; bundling
JEL Codes: D11; D21; L21; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| utility-raising goods (H49) | audience retention (Y60) |
| ads (Y60) | audience utility (L97) |
| utility-raising goods (H49) | utility lost from ads (L97) |
| audience's time (Y60) | utility derived from goods (D46) |
| ads (Y60) | ad avoidance techniques (H26) |