Equilibria in a Random Viewer Model of Television Broadcasting

Abstract

The authors considered a model of commercial television market with advertising with probabilistic viewer choice of channel, where private broadcasters may coexist with a public television broadcaster. The broadcasters influence the probability of getting viewer attention through the amount that they spend on programming, so that their advertising capacity depends on their own program outlays as well as on those of their competitors. A larger number of broadcasters will reduce overall capacity even when total program outlays are kept fixed, because the attention of viewers is split among a larger number of channels. The authors derive properties of equilibrium in an oligopolistic market with private broadcasters and show that the number of firms has a negative effect on overall advertising and viewer satisfaction. If there is a public channel that also sells advertisements but does not maximize profits, this will have a positive effect on advertiser and viewer satisfaction.