Three essays on the economics of television
Doctor of Philosophy thesis
In the first essay, titled "Broadcasting versus Narrowcasting", we identify the characteristics of TV programs which make the programs more likely to be broadcast than to be shown on pay channels. One characteristic we focus on is the degree of extensiveness of the program. We define an extensive (intensive, respectively) program as one with a broad but shallow (narrow but deep, respectively) audience. We find that broadcast television has a bias in favor of extensive programs, while pay television has a bias in favor of intensive programs. In the second essay, titled "Allocation of Programs Between Broadcast and Pay Television", we analyze the allocation of television programs between a broadcast television station and a pay television system that compete in the same market. There are two television programs, one of the programs is more extensive and the other more intensive. We show that a monopolistic producer will sell the more extensive program to broadcast television and the more intensive program to pay television. Furthermore, we show that this market allocation of programs is desirable from the welfare standpoint. Another finding of interest is that a program producer that can influence the degrees of extensiveness of programs will make the broadcast program more and more extensive and the narrowcast program more and more intensive. In the third essay, titled "Is there too much advertising on TV?", two broadcasters compete by selecting the quality of programming and the quantity of advertising. There is an optimal amount of advertising from the viewers' perspective that generates a minimum level of advertising. That is, the quantity of advertising that broadcasters offer in equilibrium is never below this optimum. If the minimum level is high, broadcasters choose high quality programming and compete for viewers by offering lower levels of advertising. Thus, viewers have two choices of high quality programming with the amount of advertising that they desire. But if the minimum level is low, viewers choose between two TV channels: one offering low quality programming with a low level of advertising and the other offering high quality programming with a high level of advertising.