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Title:Should utility-reducing media advertising be taxed? PDF Logo
Authors:Kind, Hans Jarle
Köthenbürger, Marko
Schjelderup, Guttorm
Issue Date:2009
Series/Report no.:CESifo working paper 2589
Abstract:Empirical evidence suggests that people dislike ads in media products like TV programs. In such situations standard economic theory prescribes that the advertising volume can be optimally reduced by levying a tax on ads. However, making use of recent advances in the theory of Industrial Organization and two-sided markets we show that taxing ads may be counterproductive. In particular, we identify a number of situations in which ad-adverse consumers are negatively affected by the tax, and we even show that the tax may lead to higher ad volumes. This unorthodox reaction to a tax may arise when consumers significantly dislike ads, i.e. in situations where traditional arguments for corrective taxes are strongest.
Subjects:Two-sided markets
media market
pricing strategy
ad-tax
JEL:D4
D43
H21
H22
L13
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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