In a famous article on advertising,* Gary Becker and Kevin Murphy wrote about advertisements that run during television programs: “One can say either that advertising pays for the programming—the usual interpretation—or that programming compensates for the advertising, which is our preferred interpretation.” Viewing ads during a television program (or hearing them during a radio broadcast) makes consumers worse off, so they must be compensated (with programming) for having experienced the ads. On the other hand, print ads in newspapers and magazines can be avoided by consumers, so these ads must make consumers better off; otherwise, no one would ever read them. Use this theory to answer the following questions:
a. Think about the different types of advertisements discussed in the chapter (informative, signaling, part of the product). Which type is more likely to appear on TV? Which type is more likely to appear in a newspaper or magazine? Often you’ll see television commercials, especially for pharmaceuticals, that say: “See our ad in such-and-such magazine.” What does this say about the difference between television and print ads?
b. Becker and Murphy wrote their article before TiVo and other DVR systems became popular. Nowadays, ads on television are avoidable (to a degree), just like ads in a newspaper. What impact do you think this new technology has on the types of ads you see on TV?