2006–2010

Paying to Remove Advertisements

Reprint No. 2009:46

Author(s): Joacim TågYear: 2009 Title: Information Economics and Policy Volume (No.): 21 (4) Pages: 245–252
Online article (restrictions may apply)


Media firms sometimes allow consumers to pay to remove advertisements from an adbased product. We formally examine an ad-based monopolist’s incentives to introduce this option. When deciding whether or not to introduce the option to pay, the monopolist compares the potential direct revenues from consumers who pay, with the lost advertising revenues resulting from the subsequent ad removal. If the pay alternative is introduced, the media firm increases advertising quantity to make the option to pay more attractive. This outcome hurts consumers but benefits the media firm and the advertisers. Total welfare may increase or decrease. Perhaps surprisingly, more annoying advertisements may lead to an increase in advertising quantity.


Reference:
Tåg, Joacim (2009), "Paying to Remove Advertisements". Information Economics and Policy 21(4), 245–252.

Joacim Tåg

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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