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Platform competition for advertisers and users in media markets

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  • Reisinger, Markus
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    Abstract

    This paper analyzes a two-sided market model in which platforms compete for advertisers and users. Platforms are differentiated from the users' perspective but are homogenous for advertisers. I show that, although there is Bertrand competition for advertisers, platforms obtain positive margins in the advertising market. In addition, platforms' profits can increase in the users' nuisance costs of advertising. As a general insight, I obtain that factors affecting competition in the user market in a well-known direction without externalities now have opposing effects due to competition in the advertiser market. The model can also explain why private TV platforms benefit if their public rivals are regulated to advertise less—a result at odds with models in which there is no competition for advertisers.

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    Bibliographic Info

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

    Volume (Year): 30 (2012)
    Issue (Month): 2 ()
    Pages: 243-252

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    Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:243-252

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

    Related research

    Keywords: Platform competition; Two-sided markets; Advertising; Indirect externalities;

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    References

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    Citations

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    Cited by:
    1. Thomes, Tim Paul, 2013. "An economic analysis of online streaming music services," Information Economics and Policy, Elsevier, vol. 25(2), pages 81-91.
    2. Reisinger, Markus & Ambrus, Attila & Calvano, Emilio, 2013. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79912, Verein für Socialpolitik / German Economic Association.
    3. Volodymyr Bilotkach & Nicholas G. Rupp & Vivek Pai, 2013. "Value of a Platform to a Seller: Case of American Airlines and Online Travel Agencies," Working Papers 13-08, NET Institute.
    4. von Ehrlich, Maximilian & Greiner, Tanja, 2013. "The role of online platforms for media markets — Two-dimensional spatial competition in a two-sided market," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 723-737.
    5. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.

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