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Advertising and the rise of the free daily newspapers

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  • GABSZEWICZ, Jean J.
  • LAUSSEL, Didier
  • SONNAC, Nathalie

Abstract

We analyze the competition between two newspapers in a vertical differentiation model where the qualities of the journals are determined endogenously in the first stage of the game. We show that when the advertising revenues per reader increase there is a critical value above which the quality of the low quality newspaper discontinuously falls while it becomes similtaneously a free newspaper. This is beneficial to the high quality journal and detrimental to the readers.

Suggested Citation

  • GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, 2006. "Advertising and the rise of the free daily newspapers," LIDAM Discussion Papers CORE 2006087, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2006087
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    1. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
    2. Esther Gal‐Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, September.
    3. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2002. "Press Advertising and the Political Differentiation of Newspapers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 317-334, July.
    4. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    5. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    6. Gabszewicz, Jean J & Laussel, Didier & Sonnac, Nathalie, 2002. "Press Advertising and the Political Differentiation of Newspapers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 317-334.
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    Cited by:

    1. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    2. João Correia-da-Silva & Joana Resende, 2013. "Free daily newspapers: too strong incentives to print?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(2), pages 113-130, August.

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    More about this item

    Keywords

    advertising; newspapers quality;

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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