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Estimating market power in a two-sided market: The case of newspapers

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  • Elena Argentesi

    (Dipartimento di Scienze Economiche, University of Bologna, Bologna, Italy)

  • Lapo Filistrucchi

    (Department of Economics, CenTER & TILEC, Tilburg University, Tilburg, The Netherlands; Dipartimento di Economia Politica, University of Siena, Siena, Italy)

Abstract

The newspaper industry is a two-sided market: the readers market and the advertising market are closely linked by inter-market network externalities. We estimate market power in the Italian newspaper industry by building a structural model which encompasses a demand estimation for differentiated products on both sides of the market and where profit maximization by the publishing firms takes into account the interaction between them. The question that we address is whether the observed price pattern is consistent with profit-maximizing behaviour by competing firms or is instead driven by some form of (tacit or explicit) coordinated practice. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.997
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 22 (2007)
Issue (Month): 7 ()
Pages: 1247-1266

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Handle: RePEc:jae:japmet:v:22:y:2007:i:7:p:1247-1266

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  1. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Research Reports 25164, University of Connecticut, Food Marketing Policy Center.
  2. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
  3. Christopher R. Knittel & Victor Stango, 2001. "Price ceilings as focal points for tacit collusion: evidence from credit cards," Working Paper Series WP-01-12, Federal Reserve Bank of Chicago.
  4. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
  5. Ulrich Kaiser & Hans Christian Kongsted, 2005. "Do Magazines' "Companion Websites" Cannibalize the Demand for the Print Version?," CAM Working Papers 2005-07, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  6. Ulrich Kaiser, 2007. "When Pricing Below Marginal Cost Pays Off: Optimal Price Choice in a Media Market with Upfront Pricing," CIE Discussion Papers 2007-05, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  7. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
  8. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-21, May.
  9. Kaiser Ulrich, 2006. "Magazines and their Companion Websites: Competing Outlet Channels?," Review of Marketing Science, De Gruyter, vol. 4(1), pages 1-26, August.
  10. Elena Argentesi, 2004. "Demand Estimation for Italian Newspapers: The Impact of Weekly Supplements," Economics Working Papers ECO2004/28, European University Institute.
  11. Rochet, Jean-Charles & Tirole, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers 275, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
  13. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
  14. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Press advertising and the political differentiation of newspapers," CORE Discussion Papers RP -1561, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Argentesi, Elena & Ivaldi, Marc, 2005. "Market Definition in Printed Media Industry: Theory and Practice," IDEI Working Papers 376, Institut d'Économie Industrielle (IDEI), Toulouse.
  16. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
  17. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  18. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
  19. Lapo Filistrucchi, 2005. "The Impact of Internet on the Market for Daily Newspapers in Italy," Economics Working Papers ECO2005/12, European University Institute.
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