Demand and Supply of Network Television Advertising

Abstract

In this paper a demand and supply model is constructed for the product (viewers to watch commercial minutes) which the three U.S. commercial television networks sell to advertisers. Estimates of the parameters of the model yielded price elasticities of demand varying from 0.73 to 0.92 but not differing significantly from one. Network audience was found, on the other hand, to be in highly inelastic supply. This suggests that Federal Communications Commission policies which reduce network product -- such as public service requirements, the Prime Time Access Rule, and restrictions on commercial minutes per hour on children's programs -- will have little or no effect on total network revenues.