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Newspapers and Advertising: The Effects of Ad-Valorem Taxation under Duopoly

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  • Hans Jarle Kind
  • Guttorm Schjelderup
  • Frank Stähler

Abstract

Newspapers are two-sided platforms that sell their product both to readers and advertisers. Media firms in general, and newspapers in particular, are considered important providers of information, culture and language in most countries. Newspapers are therefore given preferential tax treatment. We show that lower ad valorem taxes lead newspapers to become more differentiated. Thereby the competitive pressure falls, possibly resulting in higher newspaper prices and reduced quality investments.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1891.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1891

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Keywords: two-sided markets; ad-valorem taxes;

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  1. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
  2. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.
  3. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization, EconWPA 0505009, EconWPA.
  4. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2001. "Tax Incidence in Differentiated Product Oligopoly," Staff General Research Papers, Iowa State University, Department of Economics 5202, Iowa State University, Department of Economics.
  5. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, 2000. "Does press advertising foster the “pensée unique”?," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2000008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Rochet, Jean-Charles & Tirole, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 275, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2007. "Taxation in Two-Sided Markets," Discussion Papers, Department of Business and Management Science, Norwegian School of Economics 2007/3, Department of Business and Management Science, Norwegian School of Economics.
  8. Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0106, Department of Economics, Tufts University.
  9. Anderson, S.P. & de Palma, A. & Kreider, K., 1999. "The Efficiency of Indirect Taxes Under Imperfect Competition," Papers, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor. 99-09, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  10. Dierickx, I. & Matutes, C. & Neven, D., 1988. "Indirect taxation and cournot equilibrium," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 6(3), pages 385-399.
  11. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 152, Institut d'Économie Industrielle (IDEI), Toulouse.
  12. Sofia Delipalla & Michael Keen, 1991. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition," Working Papers, Queen's University, Department of Economics 821, Queen's University, Department of Economics.
  13. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(4), pages 949-965, July.
  14. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Press advertising and the political differentiation of newspapers," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1561, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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