Advertising and the Screening Role of Monopoly Media Provider

Media provider obtains revenues from subscribers and advertisers. In reality, consumers are heterogeneous in their willingness to pay, therefore, the media provider can adopt the strategy of second-degree price discrimination by offering consumers with different bundles of price, the amount of adverting and quality level of the contents. In this paper, we study how the monopoly media provider offers options and allocates them efficiently by screening consumers with incomplete information on consumer's willingness to pay. The result shows that, this kind of role for media provider may lead to excessive price, inadequate amount of advertising and lower quality level.