Beyond the Era of Convergence
Advances in Information, Communication and Entertainment Markets series
Edited by Hitoshi Mitomo, Hidenori Fuke and Erik Bohlin
Chapter 12: An estimation of marginal WTP for variety in the broadcasting platform
The media is defined as a service that supplies information goods to consumers via both wireless and wired transmission technology. The economic characteristics of the media are: (1) an equal amount of consumption; (2) complementarity between software and hardware; and (3) two-sided markets. Considering these characteristics, the lack of/excess variety of information goods differ depending on the type of utility function assumed for each user. If utility is assumed to increase with diversity, in other words Dixit type utility function is assumed, there is then a possibility of a lack of variety in information goods supply. In this paper, we derive demand function for channels and total TV watching time considering time and budget constraint and show that watching time is proportional to a user’s available time while wage and price do not affect a user’s total TV watching time. On the other hand, the demand for channels depends on the real wage rate and a rise in wages increases a user’s demand for the number of channels. However since we assumed the viewing time of each channel to be divided equally by the number of channels, the time spent watching each channel decreases as the total available number of channels increases. The empirical results show that the assumption that the user has a positive effect on the increase in the number of channels is reasonable. In addition, the empirical results show that the marginal WTP for an increase in the number of channels is different between television advertising, public broadcasting and pay-TV. In addition, the marginal WTP for additional channels of television advertising and public broadcasting were shown to be greater than that of pay-TV.
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