Advertising Effectiveness, Digital Video Recorders, and Product Market Competition
Abbreviated Journal Title
Mark. Sci.
Keywords
advertising; game theory; competitive analysis; marketing strategy; advertising avoidance technologies; COMMERCIALS; INFORMATION; PROVISION; Business
Abstract
With increasing fragmentation of media markets and recent advances in technology, loss of advertising effectiveness has been a great concern for marketers. For consumers, the digital video recorder (DVR) offers the possibility to fast-forward through live programming. Whereas the DVR thus benefits consumers by reducing nuisance from commercials, industry observers believe that it may diminish advertisers' profits by rendering commercials ineffective. We use a model of informative advertising to study the effect of DVR penetration on competing advertisers' strategies and profits. We find that the overall effect of DVRs depends on the trade off between loss of advertising effectiveness and reduction in competition between firms. The latter effect arises because DVR penetration may increase the ratio of partially informed to fully informed consumers. We identify conditions under which an increase in DVR penetration counterintuitively leads firms to increase advertising levels and enjoy higher profits. Interestingly, we find that greater DVR penetration is beneficial for firms when the share of DVR owners in the population is above-rather than below-a threshold level. We also study the impact of different fast-forwarding ("zipping") behaviors on product market competition.
Journal Title
Marketing Science
Volume
29
Issue/Number
4
Publication Date
1-1-2010
Document Type
Article
Language
English
First Page
639
Last Page
649
WOS Identifier
ISSN
0732-2399
Recommended Citation
"Advertising Effectiveness, Digital Video Recorders, and Product Market Competition" (2010). Faculty Bibliography 2010s. 179.
https://stars.library.ucf.edu/facultybib2010/179
Comments
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