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

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Author Info

  • Jarle Kind, Hans

    ()
    (NHH)

  • Nilssen, Tore

    ()
    (Dept. of Economics, University of Oslo)

  • Sørgard, Lars

    ()
    (NHH)

Abstract

Under the current market structure in the TV industry 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 reduce the willingness to pay for rival channels. We …find that a shift to a market structure where advertising prices as well as viewer prices are set competitively by the TV channels might increase joint industry pro…ts. 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 bene…t of the viewers.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 18/2010.

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Length: 25 pages
Date of creation: 22 Nov 2010
Date of revision:
Handle: RePEc:hhs:osloec:2010_018

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: Two-sided markets; advertising; media economics;

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References

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  1. Weeds, Helen, 2012. "TV Wars: Exclusive Content and Platform Competition in Pay TV," CEPR Discussion Papers 8781, C.E.P.R. Discussion Papers.
  2. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for how they Raise Revenue?," CESifo Working Paper Series 2713, CESifo Group Munich.
  3. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  4. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Programming and advertising competition in the broadcasting industry," CORE Discussion Papers RP -1873, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. ANDERSON, Simon P. & GABSZEWICZ, Jean J., . "The media and advertising: a tale of two-sidedmarkets," CORE Discussion Papers RP -1888, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Victor Ginsburgh & David Throsby, 2006. "Handbook of the economics of art and culture," ULB Institutional Repository 2013/1673, ULB -- Universite Libre de Bruxelles.
  7. Miklós-Thal, Jeanine & Rey, Patrick & Vergé, Thibaud, 2010. "Vertical relations," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 345-349, July.
  8. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier.
  9. Germa Bel & Joan Calzada, 2007. "Access Pricing to a Digital Broadcasting Platform," Journal of Media Economics, Taylor & Francis Journals, vol. 20(1), pages 29-53.
  10. Armstrong, Mark, 1999. "Competition in the Pay-TV Market," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 257-280, December.
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  12. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
  13. Hans Jarle Kind & Tore Nilssen & Lars S�rgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
  14. Crawford, Gregory S & Yurukoglu, Ali, 2011. "The Welfare Effects of Bundling in Multichannel Television Markets," CEPR Discussion Papers 8370, C.E.P.R. Discussion Papers.
  15. Crawford, Gregory S. & Cullen, Joseph, 2007. "Bundling, product choice, and efficiency: Should cable television networks be offered a la carte?," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 379-404, October.
  16. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
  17. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
  18. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
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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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