1 Economics of comunication COM – Degree in Corporate Communication 60 hours 9 credits Professor:...
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Transcript of 1 Economics of comunication COM – Degree in Corporate Communication 60 hours 9 credits Professor:...
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Economics of comunicationCOM – Degree in Corporate Communication
60 hours 9 credits
Professor:Marco Gambaro
office: room 24, 2° floor, via conservatorio [email protected]
office hours: Thursday from 10,30 to 13,30
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abstract• This course is a survey of economic issues in
communication and cultural industries.• It examines some of the special aspects of these
businesses that complicate the market processes, such as the particular nature of demand for experience goods, pricing strategy, scale economies and obstacles to market equilibrium that motivate public policy
• The goal is to give economic instruments for the analysis of the areas of communication and their specific problems with regard to competition, business strategies and public policies
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Course objectives
• We will survey several industries to provide an overview of the markets for different kinds of information goods.
• We will use the tools of microeconomics and of industrial economics to provide insights about features and processes that explain the specific outcomes observed in the markets for experience goods, cultural goods and information goods.
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Why economics of communication and culture ?
• There Are Unique Aspects of the Market– Creative talent in production – the creator has a personal interest in the product.– Pricing decisions – many opportunities for strategic pricing.– Zero marginal cost, production vs. replication/distribution.– Relationship between buyer and seller – artists and fans.– Market complementarities shape market structures – winner take all markets.– Demand aspects are unlike conventional commodity markets.
• There Are Some Commonalities that Allow Conventional Economic Analyses– Production concepts – the nature of production and supply, technological
change.– Market dynamics – market structure, market power, market outcomes.– Demand concepts – elasticity, consumer surplus, pricing.
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Industries examinated will include:
• Movie business: the project nature of production, vertical integration, specific contingent contract
• Music and publishing with emphasis on intellectual property• Television and radio and the fundamental differences between
public and private broadcasting market• Art market• Live performances• Museum and cultural heritage• Book publishing
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Some contents
Production and costs (fixed and variable)
Demand and elasticity
Perfect competition and monopoly
Oligopoly
Vertical integration
Market definition and concentration
Windowing and price discrimination
Definition of media markets
Two sided market
Barriers to entry
Collusion and price war
Differentiation
Pricing
Advertising and competition
Public policy and antitrust
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Some contents• Costs desease• Team production• Subsidies in cultural sector• Merit goods• Principal agent model• Copyright and piracy• Transaction cost theory of the firm• Product novelty and perceived risk, nobody
knows• Search and information costs: gate keepers and
critics, network effects, banwagon and snowball
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textbooks
• Ruth Towse, A textbook of cultural economics, Cambridge University Press
• Lipczynski, Wilson, Goddard, Industrial organization: competition, strategy, policy, Prentice Hall
• Evan, Schmalensee, The industrial organization of market with two sided platform , downlodable papers (ariel)
• Teaching notes downlodable (ariel)
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Course agenda
Week 1-6 lectures (with some cases, policy discussions and guest lectures)
Week 7: midterm exam
Week 7-10 assisted group projectwork (market study, industry analysis)
Week 10 Presentations
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Course requirements
If you attend lectures, course grade will be based on:• Mid-term written exam (7-8 short answer) 50%• Written assignement 25%• Presentation 15%• Cases and class exercise 10%
If you will not attend the lectures, grade will be based on a written exam with a slightly larger text list
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Prerequisites
• Some basic economic ideas about supply and demand; competition and monopoly
• Some knowledge of media organizations and markets. Information products
• Some familiarity with graphs and curve representations
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In order to remember
Some chapters of any basic book of economics
Lieberman-Hall, Economics: principles and applicationsSlomann, Garrett, Essentials of economicsFrank, Microeconomics and behaviours
For media, culture and communication
Opening chapters of Towse’s bookGillian Doyle, Understanding media economics, SageAlan Albarran, Media Economics: Understanding Markets,
Industries and Concepts
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• If firms have market power they can increase prices
• How do they build market power and how do they conserve it?
• Which are the consequences for different agents and for the society as a whole?
• What can public policies and industrial policies make about that?
Some starting points
Long Run Trend: Hours Worked US 1850-1956
Hours worked stops falling; hours spent on recreation (not working) stops rising.
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Recent trend in hours worked (weekly, average), 1965-2009
Economic fluctuations have much greater impact on manufacturing than on services.
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Spending on recreation is growing in absolute terms
Per capita, real spending on recreation
and recreation services.
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The long run trend in recreation expenditure as a proportion of real income is growing
Recreation as a % of Disposable Income
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The form of recreation spending is changing
Service Component of Recreation Expenditures
Service = Movies, Sports, … (passive) 1959-200918
Adding It Up• Household income is not rising very much• Time spent working is steady or falling slightly• Time spent on recreation is no longer rising• Budget allocated to:
– entertainment, health care are rising– food and clothing are falling
• Growing entertainment market is driven by– budget reallocation – changes in preferences.– changing technologies and falling prices
• Demand in the recreational segment of the economy is rising faster than overall output.
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Economic features of information goods
• Intangible• Non rival in consumption• Hardly excludable• Difficult define iownership
• MANY FEATURES LIKE PUBLIC GOODS
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Business models for information goods
Three main strategies• Advertising• Selling the product ( subscription)• Public support
Mixed stategies are emerging in digital world• Fremium• Complementary products• Flat rate (all you can eat)
Costs of information goods
Cheap to distributeCheap to distribute
Unitary costs of reproduduction are very low
Costant marginal cost
(small scale economies in industrial segment)
Raise the output will reduce average costs
Costly to produce Costly to produce
Usually high initial fixed costUsually high initial fixed cost
Mainly sunk sunk
(price war and more risks)
Traditional equilibrium does not always work
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