Should Utility-Reducing Media Advertising be Taxed?
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Empirical evidence suggests that people dislike ads in media products like TV programs. In such situations standard economic theory prescribes that the advertising volume can be optimally reduced by levying a tax on ads. However, making use of recent advances in the theory of Industrial Organization and two-sided markets we show that taxing ads may be counterproductive. In particular, we identify a number of situations in which ad-adverse consumers are negatively affected by the tax, and we even show that the tax may lead to higher ad volumes. This unorthodox reaction to a tax may arise when consumers significantly dislike ads, i.e. in situations where traditional arguments for corrective taxes are strongest.
Original language | English |
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Place of Publication | Munich |
Number of pages | 28 |
Publication status | Published - 2009 |
- Faculty of Social Sciences - two-sided markets, media market, pricing strategy, ad-tax
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ID: 14249847