Tore Nilssen

Competition for Viewers and Advertisers in a TV Oligopoly

Abstract This study considers a model of a TV oligopoly where TV channels transmit advertising and viewers dislike such commercials. It is shown that advertisers make a lower profit the larger the number of TV channels. If TV channels are sufficiently close substitutes, there will be underprovision of advertising relative to social optimum. This study also finds that the more viewers dislike ads, the more likely it is that welfare is increasing in the number of advertising-financed TV channels. A publicly owned TV channel can partly correct market distortions, in some cases, by having a larger amount of advertising than private TV channels. It may even have advertising in cases where advertising is wasteful per se.

Consumer lock-in with asymmetric information

Abstract A two-period version of the Rothschild and Stiglitz (1976) model of competitive screening in an insurance market is presented. Its features include: repeat purchase of insurance among consumers; no commitment among insurers or consumers; asymmetric information among insurers about a consumers accident history; and state-contingent contracts. An equilibrium may exist in this model with full pooling in period one and consumer lock-in in period two. In such an equilibrium, high-risk consumers are experience-rated and firms earn negative profits in period one and positive profits in period two.

Non-discriminating renegotiation in a competitive insurance market

Abstract A variant of the Rothschild-Stiglitz model of a competitive insurance market is considered, where each uninformed firm is allowed to renegotiate the contracts that its customers initially sign, subject to the restriction that renegotiated contracts be offered to all the firms customers. Such non-discriminating renegotiation is shown to weaken the profitability of cream skimming to the extent that there exists a unique equilibrium outcome. This outcome is that of Miyazaki and Spence i.e., the incentive-compatible pair of zero-profit contracts, if efficient; and the incentive-compatible, zero-profit pair of contracts maximizing low-risk utility, otherwise.

Insurance monopoly and renegotiation

SummaryThe mechanism design problem of a monopoly insurer — faced with privately informed insurees — is considered. It is assumed that the insurer cannot commit not to renegotiate (by using the information that customer separation reveals) before contracts are put into force. A solution is offered by modeling renegotiation-proofness in a framework inspired by Greenbergs theory of social situations. Maximizing profit within the set of renegotiation-proof outcomes always leads to a semi-separating outcome (i.e. neither full pooling nor full separation can occur) and may leave all low-risks as well as some of the high-risks self-insured.

Cream Skimming, Dregs Skimming, and Pooling: On the Dynamics of Competitive Screening

We discuss the existence of a pooling equilibrium in a two-period model of an insurance market with asymmetric information. We solve the model numerically. We pay particular attention to the reasons for non-existence in cases where no pooling equilibrium exists. In addition to the phenomenon of cream skimming emphasized in earlier literature, we here point to the importance of the opposite: dregs skimming, whereby high-risk consumers are profitably detracted from the candidate pooling contract.

Deductibles in Health Insurance: Pay or Pain?

We study a health-insurance market where individuals are offered coverage against both medical expenditures and losses in income due to illness. Individuals vary in their level of innate ability and their probability of falling ill. If there is private information about the probability of illness and an individuals innate ability is sufficiently low, we find that competitive insurance contracts yield screening partly in the form of co-payment, i.e., a deductible in pay, and partly in the form of reduced medical treatment, i.e., a deductible in pain.

Keep on Fighting: Dynamic Win Effects in an All-Pay Auction

We investigate a multi-period contest model in which a contestant.s present success gives an advantage over a rival in the future. How this win advantage affects contestants.efforts, and whether the laggard gives up or keep on fighting are key issues. We find that the expected effort of the laggard will always be higher than the rival at some stage in the series of contests, and this is most likely to happen when at a large disadvantage or at a late stage in the series.

The television industry as a market of attention

Abstract In this article, I present an economist’s perspective on the TV industry and view it as a so-called two-sided market, with advertisers on the one side benefiting from the presence of TV viewers and TV viewers on the other side having a dislike for advertising on TV. I use this framework to discuss the likely future development of pay TV, in particular how a future increase in competition in the TV industry will affect the prevalence of pay TV over advertising-financed TV.