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Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or both?

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Author Info

  • Simon P. Anderson
  • Oystein Foros
  • Hans Jarle Kind

Abstract

Equilibrium prices behave quite differently if consumers single-purchase (buy either Time Magazine or Newsweek) or if some consumers multi-purchase (buy both). Prices are strategic complements under single-purchase, and increase with magazine quality. In a multi-purchase regime prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with magazine quality due to overlapping content. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase. We determine when each regime holds, and present a detailed reaction function analysis which applies more generally to duopoly pricing.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3096.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3096

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Related research

Keywords: magazine competition; multi-purchase; incremental pricing; content competition;

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References

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  1. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
  2. de Palma, Andre & Leruth, Luc & Regibeau, Pierre, 1999. "Partial compatibility with network externalities and double purchase," Information Economics and Policy, Elsevier, vol. 11(2), pages 209-227, July.
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Cited by:
  1. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2011. "Media market concentration, advertising levels, and ad prices," Discussion Paper Series in Economics 24/2011, Department of Economics, Norwegian School of Economics.
  2. Helmut Dietl & Markus Lang & Panlang Lin, 2012. "The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV," Working Papers 0153, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. Michael Funke & Yu-Fu Chen & Aaron Mehrota, 2011. "Global warming and extreme events: Rethinking the timing and intensity of environment policy," Quantitative Macroeconomics Working Papers 21105, Hamburg University, Department of Economics.

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