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Working Paper

A Theory of Broadcast Media Concentration and Commercial Advertising

Brendan Cunningham and Peter Alexander.  

Media Bureau Staff Research Paper 2002-6 (Sept 2002) analyzes a model in which the interaction of broadcasters, advertisers, and consumers determines the level of non-advertising broadcasting produced and consumed.   Cunningham (Dept. of Economics, U.S. Naval Academy) and Alexander (Media Bureau) find that an increase in concentration in broadcast media industries may lead to a decrease in the total amount of non-advertising broadcasting. The strength of this inverse relationship depends, in part, on the behavioral response of consumers to changes in advertising intensities.

The authors also present numerical general equilibrium solutions to their model and demonstrate a positive relationship between consumer welfare and the number of firms in the broadcast industry.

Issued: September 2002

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