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Price structure in two-sided markets: Evidence from the magazine industry

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  • Kaiser, Ulrich
  • Wright, Julian

Abstract

We present and estimate a model of competition in a two-sided market: the market for magazine readership and advertising. Using data on magazines in Germany, we find evidence that magazines have properties of two-sided markets. The results are consistent with the perception that prices for readers are "subsidized" and magazines make most of their money from advertisers. Consistent with advertisers valuing readers more than readers value advertisements, our results imply that higher demand or lower costs on the reader side increase ad rates, but that higher demand or lower costs on the advertising side decrease cover prices. --

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 24 (2006)
Issue (Month): 1 (January)
Pages: 1-28

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Handle: RePEc:eee:indorg:v:24:y:2006:i:1:p:1-28

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Web page: http://www.elsevier.com/locate/inca/505551

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References

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  1. Thompson, R S, 1984. "Structure and Conduct in Local Advertising Markets: The Case of Irish Provincial Newspapers," Journal of Industrial Economics, Wiley Blackwell, vol. 33(2), pages 241-49, December.
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  4. Dewenter, Ralf, 2003. "The Economics of Media Markets," Working Paper 10/2003, Helmut Schmidt University, Hamburg.
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  10. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
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  12. Dertouzos, James N & Trautman, William B, 1990. "Economic Effects of Media Concentration: Estimates from a Model of the Newspaper Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 1-14, September.
  13. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
  14. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  15. Ulrich Kaiser, 2002. "The Effects of Website Provision on the Demand for German Women's Magazines," NBER Working Papers 8806, National Bureau of Economic Research, Inc.
  16. Jorge A, Ferrando & Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Two-Sided Network Effects and Competition : An Application to Media Industries," Working Papers 2004-09, Centre de Recherche en Economie et Statistique.
  17. Evans David S., 2003. "Some Empirical Aspects of Multi-sided Platform Industries," Review of Network Economics, De Gruyter, vol. 2(3), pages 1-19, September.
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