TY - UNPB

T1 - Should Utility-Reducing Media Advertising be Taxed?

AU - Kind, Hans Jarle

AU - Köthenbürger, Marko

AU - Schjelderup, Guttorm

N1 - JEL classification: D40, D43, H21, H22, L13

PY - 2009

Y1 - 2009

N2 - 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.

AB - 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.

KW - Faculty of Social Sciences

KW - two-sided markets

KW - media market

KW - pricing strategy

KW - ad-tax

M3 - Working paper

BT - Should Utility-Reducing Media Advertising be Taxed?

CY - Munich

ER -