The Market for Television Advertising: Model and Evidence

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AUTHOR:
Robert Kieschnick
  University of Texas at Dallas
B. D. McCullough
  Drexel University
Steven S. Wildman
  Michigan State University

TITLE:
The Market for Television Advertising: Model and Evidence

KEYWORDS:
broadcast, cable, market segmentation, multicollinearity

SUGGESTED CITATION:
Robert Kieschnick , B. D. McCullough, and Steven S. Wildman (2002) "The Market for Television Advertising: Model and Evidence ", Review of Marketing Science Working Papers: Vol. 1: No. 2, Working Paper 5.
http://www.bepress.com/roms/vol1/iss2/paper5

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ABSTRACT:
We provide a model of television advertising based on an explicit characterization of an advertisement's contribution to an advertiser's profits that suggests that each program faces a downward sloping demand for its ad time. Hence Fournier and Martin's (1983) "law of one price" does not hold in our model. We study these contrasting arguments about television advertising by examining the pricing of broadcast network advertising. In conducting this empirical examination we encounter and solve a severe multicollinearity problem. We conclude that the evidence supports the advertising model presented in this paper and demonstrates segmentation between cable and broadcast viewers in the national television advertising market.