The optimal ratio between advertising and sales income

Abstract

We derive the optimal ratio between advertising and sales income when a publisher maximises its profits with respect to advertising space and product price. If consumers are more adverse towards advertising than towards price, the ratio is higher. The same theoretical framework is used to examine the relationship between the structure of media revenues and product quality. The findings of the model confirm empirical observations and some stylised facts of the media industry. In addition, we discuss some possible extensions of the model in order to include the evolution of business methods in media markets, and describe the managerial implications.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 11 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.