|M.Sc Student||Gantman Nataly|
|Subject||Models of Advertising of Competing Broadcasting Networks|
|Department||Department of Industrial Engineering and Management||Supervisor||Dr. Oz Shy|
We analyze the rivalry between two broadcasting networks competing both on market for viewers and the market for advertising. The primary purpose of this thesis is to examine how competition between networks affects the quantity and the timing of advertising and how the existence of advertising-averse viewers affects competition between networks. For this purpose, two complementary types of models are analyzed. These models analyze heterogeneous viewers who differ in their attitudes toward advertising. All our results are tied to the parameter measuring the proportion of viewer population who are advertising-averse (as opposed to advertising indifferent viewers). We analyze the effects of advertising-aversion on networks’ profits and the quantity of advertising. In addition, the present paper investigates whether advertising airtime should or should not be regulated. Given that the market is fully served, an increase in proportion of ad-averse viewers will increase advertising prices paid by advertising firms and enhance broadcasters’ profit levels. However, when channels do not compete for advertisers (we assume that each producer will advertise in specific channel which represents his potential customers), an increase in the proportion of ad-averse viewers will increase advertising prices, decrease the number of advertising firms, and will result in lower profits to broadcasters. Thus, when networks are monopolies, they accommodate the needs of the viewers. According to our models, equilibrium advertising levels can be greater than socially optimal levels under some circumstances, or could be smaller.