THESIS
2015
iv leaves, v-xi, 94 pages : illustrations ; 30 cm
Abstract
Essay One: Modeling Advertisers’ Willingness to Pay (WTP) in TV Commercial Slot
Selling Auctions
This paper uncovers advertisers’ underlying willingness to pay (WTP) in HK television
commercial slot selling auctions which are overlapped discriminatory multi-unit auctions with
discrete semi-sealed bids. We specify advertisers’ WTP as a parametric function of their
intrinsic valuations of pure slot attributes, as well as extrinsic valuations which depend on the
context of the focal auction and competition from other auctions selling similar commercial
slots. The two “no-regret” bidding principles (first proposed by Haile and Tamer, 2003) are
extended to obtain informative boundary conditions for asymptotical identification. Results
show that the WTP largely depends on TV rating....[
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Essay One: Modeling Advertisers’ Willingness to Pay (WTP) in TV Commercial Slot
Selling Auctions
This paper uncovers advertisers’ underlying willingness to pay (WTP) in HK television
commercial slot selling auctions which are overlapped discriminatory multi-unit auctions with
discrete semi-sealed bids. We specify advertisers’ WTP as a parametric function of their
intrinsic valuations of pure slot attributes, as well as extrinsic valuations which depend on the
context of the focal auction and competition from other auctions selling similar commercial
slots. The two “no-regret” bidding principles (first proposed by Haile and Tamer, 2003) are
extended to obtain informative boundary conditions for asymptotical identification. Results
show that the WTP largely depends on TV rating. Advertisers’ WTP decreases with tighter
budget constraints, more bidding experience, or more available similar slots. The model is
useful for the TV station to predict revenue. In order to protect advertisers’ profits, two ads in
the same product category are not allowed to be broadcast in the same commercial break. We
find that advertisers’ WTP increases significantly when the TV station merges a group of
smaller categories into one bigger category.
Essay Two: Are Advertisers Getting Their Money’s Worth? – Evidence from A
Comprehensive Study of TV Viewers’ Commercial Viewing Behavior
In traditional broadcast networks, commercials are usually priced based on the expected
audience size of associated TV programs. However, the actual audience size of commercials varies since viewers may zap during commercial breaks. This paper conducts a comprehensive study of TV viewers’ zapping behavior and examines the impact of the
resulting audience loss on advertising cost-effectiveness.
Specifically, we model individual viewer’s binary viewing decisions in each minute of a
commercial break and adopt a latent class approach to account for viewer heterogeneity.
Unlike previous research in which data are limited in one way or another, this research
employs a unique, large-scale and rich data set (more than 2 million observations across
consumer and minute) to include all important variables collectively identified by prior
literature and their interactions. Thus, we can obtain more accurate predictions. To the best of
our knowledge, this is the first empirical study which includes individual viewer’s interactions
with environmental factors as predictors of zapping, in particular viewers’ immediate and
cumulative involvement levels in associated programs. We find that the zapping propensity is
negatively correlated with both immediate and cumulative involvement levels. Moreover, the
magnitudes of correlations with cumulative involvement level vary across program genres
and viewers in zap-prone segments are more/less sensitive to immediate/cumulative
involvement level than those who are less zap-prone.
Using actual price paid for each ad, we further examine advertising cost-effectiveness by
studying firms’ best advertising purchase strategies in different scenarios. When advertisers
are allowed to choose specific ad positions within a commercial break, one major healthcare
product company in HK saves 8.8% amount of money to achieve the same number of ad
exposures by accounting for the audience loss during commercial breaks in the advertising
purchase strategy, compared with purchasing ad solely based on program audience sizes.
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