have access. This common property resource tends to be excessively exploited, resulting
in congestion in equilibrium. By contrast, a monopoly gatekeeper prices out congestion.
Anderson and Peitz (2014a) show how this approach can be integrated into a model of
competing media platforms. Here, we illustrate their setting, closely following
Anderson
et al. (2012)
. To see how advertising congestion changes the nature of media competi-
tion, consider, first, the situation with a fixed amount of time spent by a representative
user on each of the n media platforms. Website quality maps into usage time. The idea
here is that consumers surf the web, spend more time on higher-quality websites and less
on lower-quality ones. Advertisers are supposed to offer totally differentiated products.
Thus, advertisers are monopolists vis-à-vis consumers. Suppose, furthermore, that adver-
tisers extract the full expected surplus from consumers.
Consumers access pages of the different websites in random order. If they visit more
pages of a website, they will be exposed to more ads from that website. Websites are
assumed to benefit from industry-wide perfect tracking. If the value of the marginal
advertiser is larger than the expected value of a repeated impression of a given ad (which
holds if congestion is not too severe), all consumers will see an ad only once. Ads will be
placed randomly. Even though advertising does not affect media consumption, the web-
site will not post an unlimited number of ads. This is so because it cannot discriminate
between different types of advertisers and thus has to lower the ad price as it takes in more
advertisers.
Each media website decides how many ads to place at an initial stage since this is
mostly a question of how to design the website or how to structure the bundle of content
and advertising. Denote by σ
i
the amount of time spent on website i ¼1, … , n, and by
σ
0
the time spent not using the Internet (the outside option), and normalize the total time
available to 1. If website i shows a
i
ads and a consumer spends all her time on this site, the
consumer’s total exposure is a
i
. To make a match between an advertiser and any given
consumer, this consumer must be exposed to the corresponding ad and she must recall the
ad. Each consumer will see Γ ¼
P
n
i¼1
a
i
σ
i
ads in total. However, if the (fixed) attention
span φ of a consumer is less than this number—i.e., φ < Γ—the consumer will not
remember some of the ads. Hence, for these ads no match is formed. Advertisers are
ranked according to the willingness-to-pay to contact potential consumers. Hence,
the a-th advertiser is willing to pay p(a) to attract the attention of a consumer. With con-
gestion, the willingness-to-pay of the a-th advertiser reduces to p(a)φ/Γ. With a
i
ads on
platform i, the ad price conditional on making an impression must be equal to the
willingness-to-pay of the marginal advertiser—i.e., p(a
i
)φ/Γ. Since the ad makes an
impression with probability σ
i
, each ad generates revenue σ
i
p(a
i
)φ/Γ. Thus, website i
maximizes its profit as the product of number of ads and revenue per ad,
σ
i
a
i
pa
i
ðÞφ
Γ
¼Aa
i
ðÞ
σ
i
φ
Γ
;
523The Economics of Internet Media