Media Concentration and Consumer Product Prices

We examine the interaction of commercial media and retail producers of well-known consumer products when advertising is used to differentiate brands. In particular, we address how competition in the media market affects choices of advertising and program quality. The results suggest counter-intuitively that advertisers may actually prefer media markets with less competition for audiences. Product differentiation through advertising is more effective when media markets are less competitive, leading to higher prices for advertised products. As a result, media concentration may lead to higher profits for advertising firms if the additional revenue exceeds the higher advertising costs associated with media concentration.