Memorandum, Department of Economics, University of Oslo 25/2011
We show how increased competition in a media market may have implications for the competition between firms that are advertising in that medium. We apply a simple model of a product market with network externalities where firms buy advertising space in a media market and find that there is more entry in the product market, the more competitive the media market is. The paper is the first combining a study of media markets with a behavioral foundation of how advertising affects the demand for the advertised products.
Advertising Media Market Availability Heuristic Network Externalities