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Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers

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Abstract

This paper investigates the price war in the UK quality newspaper industry in the 1990s. We build a model of the newspaper market which encompasses demand for differentiated products on both, the readers and advertisers side of the market, and profit maximization by four competing oligopolistic editors who recognize the existence of an indirect network effect of circulation on advertising demand. Editors choose first the political position, then simultaneously cover prices and advertising tariffs. We contribute to the literature on two-sided markets by endogenizing the political differentiation of newspapers in a model with more than two firms. We simulate changes to market structure in order to explore which of the candidate explanations is most likely to lie behind the observed price war.

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File URL: http://www.netinst.org/Behringer_Filistrucchi_09-26.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 09-26.

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Length: 31 pages
Date of creation: Nov 2009
Date of revision: Dec 2009
Handle: RePEc:net:wpaper:0926

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Web page: http://www.NETinst.org/

Related research

Keywords: antitrust; two-sided markets; media markets; UK quality newspapers; predation; price wars; advertising; platforms.;

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References

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  1. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Press advertising and the ascent of the `Pensée Unique'," CORE Discussion Papers RP -1512, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
  3. Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
  5. 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 317-34.
  6. Gual, Jordi & Hellwig, Martin F. & Perrot, Anne & Polo, Michele & Rey, Patrick & Schmidt, Klaus M. & Stenbacka, Rune, 2005. "An Economic Approach to Article 82," Discussion Papers in Economics 745, University of Munich, Department of Economics.
  7. Gotz, Georg, 2005. "Endogenous sequential entry in a spatial model revisited," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 249-261, April.
  8. Chandra, Ambarish & Collard-Wexler, Allan, 2008. "Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry," MPRA Paper 7954, University Library of Munich, Germany.
  9. Wright, Julian, 2003. "One-Sided Logic in Two-Sided Markets," Working paper 382, Regulation2point0.
  10. Behringer, Stefan, 2007. "Spacial Predation in the UK Newspaper Industry," MPRA Paper 3242, University Library of Munich, Germany, revised 15 Apr 2007.
  11. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
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Citations

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Cited by:
  1. Senay Sokullu, 2012. "Nonparametric Analysis of Two-Sided Markets," Bristol Economics Discussion Papers 12/628, Department of Economics, University of Bristol, UK.
  2. Sagit Bar-Gill, 2013. "Game of Platforms: Strategic Expansion in Two-Sided Markets," Working Papers 13-12, NET Institute.
  3. GABSZEWICZ, Jean J. & RESENDE, Joana, . "Differentiated credence goods and price competition," CORE Discussion Papers RP -2461, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Filistrucchi, L. & Geradin, D.A.A.G. & Damme, E.E.C. van, 2012. "Identifying Two-Sided Markets," Discussion Paper 2012-008, Tilburg University, Tilburg Law and Economic Center.

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