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.
