CHAPTER 3
Empirical Modeling for Economics of
the Media: Consumer and Advertiser
Demand, Firm Supply and Firm Entry
Models for Media Markets
Steven T. Berry*, Joel Waldfogel
†
*
David Swensen Professor of Economics, Yale University, New Haven, CT, USA
†
Frederick R. Kappel Chair in Applied Economics, Carlson School of Management, University of Minnesota,
Minneapolis, MN, USA
Contents
3.1. Introduction 92
3.2. Audience Demand 93
3.2.1 Introduction 93
3.2.2 Classic Discrete Choice with Observed and Unobserved Product Characteristics 96
3.2.3 Identification of Demand Parameters 98
3.2.4 Example of a Single-Parameter Nested Logit 100
3.2.5 Further Examples of Audience Demand 101
3.3. Advertiser Demand 105
3.4. The Supply Side: Choice of Prices, Ad Quantity, and Other Continuous Characteristics 107
3.5. The Supply Side: Positioning and Entry 114
3.5.1 Entry Models with Differentiation 116
3.6. Future Challenges 118
References 119
Abstract
We present empirical techniques that are both familiar to students of industrial organization and useful
for modeling of media markets. We first focus on demand estimation with discussion of various discrete
choice models. We then turn to estimation of the demand for advertising. We next turn to the supply
side of the market. We discuss the estimation of models using continuous variables that firms choose
(such as prices or ad level), followed by a discussion of entry models with both homogeneous and
differentiated products. We conclude with a brief discussion of future challenges.
Keywords
Demand estimation, Discrete choice, Entry modeling
JEL Codes
C01, L82
91
Handbook of Media Economics,Volume1A © 2016 Elsevier B.V.
ISSN 2213-6630,
http://dx.doi.org/10.1016/B978-0-444-62721-6.00003-2 All rights reserved.
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