Contemporary issues in media and entertainment

This dissertation is composed of two essays that focus on building game-theoretic models to address several contemporary issues in media and entertainment. The first essay examines the effects of competition between television channels on the amount of time they dedicate to advertising, while accounting for consumers' heterogeneity in two dimensions: program type preference, and degree of aversion to advertising. Comparing the equilibrium advertising levels of: a monopoly network, a duopoly comprised of two networks, and a duopoly comprised of a network and a premium cable channel shows that when product differentiation is at mid-range, the equilibrium advertising level of both types of duopolies is higher than that of a monopoly network, and that the advertising rate of a network competing with a cable channel is higher than that of a network competing with another network. The essay also presents a sequential entry model starting with a network monopoly followed by the entry of a second network followed by the entry of a premium cable channel and shows that each subsequent entry can lead to an increase in advertising levels.;The second essay examines two issues in pricing entertainment goods. The first is investigating the economic rationale behind the practice of uniform pricing of vertically differentiated goods that is ubiquitous in the movie industry. Under a set of plausible conditions, uniform pricing can mitigate competition between a firm's high quality products and its rival's low quality ones; therefore, the profits of competing firms under uniform pricing (selling all goods at the same price) are higher than those under differentiated pricing (selling each good at a different price). In addition, if firms have the ability to adjust their prices in response to their rivals' choice of pricing regime, uniform pricing can be sustained as the equilibrium pricing regime. The second issue to investigate the optimal pricing structure in the music industry after the recent technological developments that allowed music producers to unbundle their products and sell individual songs to consumers via download. Compared to pure unbundling and mixed bundling (selling each product at a different price but offering a discount if the consumer buys both products from the same firm), pure bundling leads to the lowest profits. The essay also characterizes the conditions under which pure unbundling leads to higher/lower profits than those of mixed bundling.