Quality choice and advertising regulation in broadcasting markets

We consider the role of the endogenous choice of platform quality in a broadcasting duopoly market where competing media platforms also choose their levels of advertising. We compare the equilibrium levels of quality, advertising and welfare under private and mixed duopoly competition. We show that the welfare comparison between the private and mixed duopoly regimes depends crucially on the interplay between the net direct effect of advertising on welfare and the degree of substitutability between platforms. We also consider the effects on quality and welfare of recent policies that tend to eliminate advertising as a source of financing for publicly-owned platforms.

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