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Price Coordination in Two-Sided Markets: Competition in the TV Industry

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  • Hans Jarle Kind
  • Tore Nilssen
  • Lars Sørgard

Abstract

The TV industry is a two-sided market where both advertisers and viewers buy access to the programs offered by competing TV channels. Under the current market structure advertising prices are typically set by TV channels while viewer prices are set by distributors (e.g. cable operators). The latter implies that the distributors partly internalize the competition between the TV channels, since they take into account the fact that a lower viewer price at one channel will harm rival channels. We nonetheless find that a shift to a market structure where both advertising prices and viewer prices are set competitively by the TV channels might increase joint industry profits. The reason is that this market structure, in contrast to the one we observe today, directly addresses the two-sidedness of the market. We also show that this is to the benefit for the viewers.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-03/cesifo1_wp3004.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3004.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3004

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Keywords: price coordination; two-sided markets; media economics;

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References

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  1. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
  2. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers.
  3. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
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Cited by:
  1. Harald Nygard Bergh & Hans Jarle Kind & Bjørn-Atle Reme & Lars Sørgard, 2012. "Competition between Content Distributors in Two-Sided Markets," CESifo Working Paper Series 3885, CESifo Group Munich.
  2. Ballon, Pieter & Bleyen, Valérie-Anne & Donders, Karen & Lindmark, Sven, 2012. "The double "layered" platform structure of the audiovisual media industry: A case study of Flanders," 23rd European Regional ITS Conference, Vienna 2012 60344, International Telecommunications Society (ITS).

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