"Does the Law of One Price Hold in Television Advertising?"

Robert Kieschnick, FCC
Bruce McCullough, FCC

Abstract

Fournier and Martin (1983) argue that the law of one price
requires that the price of television advertising spots during two
programs that deliver the same audience size and demographic profile
should be the same. However, Wildman and Cameron (1989) argue that
advertising markets are segmented because of the correlation between
consumer behavior and preferences for media products and
consequently the law of one price need not hold. We study these
contrasting arguments in television advertising by examining the pricing
of broadcast network advertising. In conducting this examination we
provide a solution to the multicollinearity problem and we conclude that
the evidence calls into question the law of one price for television
advertising.