Asset Specificity and Network Control of Television Programs

Daniel Lin

Advisor: Donald Boudreaux

Enterprise Hall, 318
November 28, 2007, 07:00 PM to 07:00 PM


This dissertation uses transaction-cost theories to explain the shift from advertiser control to network control of programs in the 1950s television industry. In the late 1940s, ratings data revealed that the audience for one program tended to flow into neighboring programs. This paper proposes that the threat of ex-post opportunism discouraged advertisers from making the necessary ex-ante investments to exploit audience flow. The networks were better positioned to constrain the opportunism by consolidating the control rights to production and scheduling, increasing the contract duration with key production personnel, and placing more contractual restrictions on producers.