Handbook of Media Economics, vol 1A

utility of blocking. Hence, the fraction of blocking consumers is ς ¼1 GvðÞ. Consider

the game in which, simultaneously, consumers decide whether to block and advertisers

decide how many ads to send. A pair (ς



, h



) constitutes an equilibrium of this game. In

this model, the cost–benefit ratios for advertisers and consumers, κ/Λ and ϕ/(1 Λ), play

a decisive role. They reflect the cost of an ad relative to the benefit of a successful match.

Johnson (2013) shows that the second-best advertising level (when consumers are free

to block advertising) is smaller than the equilibrium level h



if and only if the cost–benefit

ratio on the consumer side is larger than the cost–benefit ratio on the advertiser side. In

equilibrium, advertisers are indifferent ...