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Advertising and Program Content in a Mixed Economy Television Broadcast Industry

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Abstract

The data reveals pervasive state ownership of the television media as well as a large share of television audiences for state broadcasters the world over. In spite of this, recent papers dealing with program con-tent and advertising levels have treated the television industry as being purely privately owned. We consider program content and advertising levels in a mixed economy television broadcast industry with Free to Air (FTA) broadcasting technology, where a welfare maximizing state broadcaster competes with a pro…t maximizing private broadcaster. We …nd that regardless of advertising pro…tability, advertising levels on both broadcasters are more optimal, and hence the welfare from advertising is higher under mixed economy. Although welfare from program content is lower under mixed economy, total welfare under mixed economy always exceeds total welfare under private economy. Pro…ts for both private and state broadcasters under mixed economy may exceed or fall below that under private economy depending on the relation between the nuisance level to viewers from advertisements and the pro…tability of advertising. We provide a welfare argument for the continued existence and operation of loss making state broadcasters.

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