The economics of advertising with inclusion of the media

This dissertation is a collection of three theoretical essays concerning the economics of advertising. The unifying aspect is the inclusion of commercial media in the analysis. The research described in the dissertation examines the interaction of commercial media with firms that buy advertising. In all three chapters, producers in a differentiated product market compete in prices and advertising. The media are linked to producers through the advertising market and to consumers through the media market.;Chapter 1 describes a model of the market for informative advertising. The model shows that less product market differentiation or more media market differentiation leads to higher levels of advertising, occasionally in excess of the socially optimal level.;Chapter 2 (coauthored with Esther Gal-Or) examines firms' advertising choices in a differentiated product duopoly when firms and media ( stations) enter bilateral negotiations to determine the price of advertising space. It is shown that more differentiated media stations and improved effectiveness of primetime advertising yield higher levels of advertising and lower profits for producers as well as stations. In contrast, more differentiated product markets enhance the profitability of both the media and the product markets. The impact of exclusivity contracts between firms and stations is also examined.;In Chapter 3, a firm uses advertising not to inform consumers, but rather to brand its product in order to differentiate it from rival products. Less competitive media market provides producers with a more direct way to distribute their branding messages. This leads to a more differentiated product market and, consequently, higher product prices.