Prof. Dr. Alexander Kempf (University of Cologne):
"Quantity restrictions on advertising, commercial media bias, and welfare"
(with Anna Kerkhof)
Thursday, October 16, 10:00am – 12:00pm (WiSo Building, Room 410)
We study the welfare effect of a quantity restriction on advertising in free-to-air television in the presence of commercial media bias. Senders face a trade-off between increasing the number of viewers by sending content that is highly valued by viewers, and increasing the price of advertising spots by choosing advertiser friendly content. A cap on advertising drives up per viewer price of ads, thus content improves for viewers. Therefore, the cap can be welfare enhancing, even when the traditional argument for an advertising cap based on viewers' ad aversion does not apply. Competition among broadcasters makes it more likely that a local cap on advertising improves welfare; therefore competition is not a substitute for regulation in this market.