Who Are the Advertisers?

We seek to explain why TV advertising is dominated by a few product categories. We apply a model of the TV industry that encompasses both the product markets and the market for TV viewers to discuss who will advertise on TV. Under the assumption that viewers dislike advertising, entailing a contagion effect in advertising, we find that less profitable firms not only will advertise less than highly profitable firms but will choose not to advertise at all. (77 words) *This is a revised version of parts of our previous paper, “TV Advertising, Programming Investments, and Product-Market Oligopoly”. We are indebted to Philippe Cyrenne, Ted Frech, Jean Gabszewicz, Laurent Linnemer, and seminar participants at the Universities of Calgary, California-Berkeley, California-Santa Barbara, and Colorado, at Northwestern University and Copenhagen Business School, and at the 2000 meetings of CEA (Vancouver), EEA (Bolzano), and EARIE (Lausanne), for helpful comments. Part of this research is financed by the Norwegian Competition Authority and the Norwegian Ministry of Government Administration through SNF (The Foundation for Research in Economics and Business Administration). Part of Nilssen’s research was done during a visit at the Haas School of Business at the University of California, Berkeley. Part of Sørgard’s research was done during a visit at the Department of Economics at the University of California, Santa Barbara. The hospitality of the two institutions, as well as travel grants from the Research Council of Norway and the U.S.-Norway Fulbright Foundation for Educational Exchange, are gratefully acknowledged.