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News Aggregators and Competition Among Newspapers in the Internet

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Author Info

  • Doh-Shin Jeon

    ()
    (Toulouse School of Economics)

  • Nikrooz Nasr Esfahani

    ()
    (Toulouse School of Economics)

Registered author(s):

    Abstract

    In this paper, we study how the presence of a news aggregator affects competition among (horizontally differentiated) newspapers in the Internet. For this purpose, we build a model of multiple issues which allows each newspaper to choose quality on each issue. Our model provides a micro foundation for the service offered by the aggregator and captures both the "business-stealing effect" and the "readership-expansion effect" of the aggregator. We find that the presence of the aggregator leads each newspaper to specialize in terms of news coverage. In this case, its presence changes quality choices from strategic substitutes to strategic complements. In the case of symmetric newspapers, this leads to an increase in the quality of newspapers and an increase in consumer surplus, with an ambiguous effect on newspapers’ profits. In the case of asymmetric newspapers, quality can increase or decrease depending on the sensitivity of advertising revenue to quality.

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    File URL: http://www.NETinst.org/Jeon_12-20.pdf
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    Bibliographic Info

    Paper provided by NET Institute in its series Working Papers with number 12-20.

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    Length: 49 pages
    Date of creation: Oct 2012
    Date of revision:
    Handle: RePEc:net:wpaper:1220

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

    Related research

    Keywords: Newspapers; News Aggregator; Internet; Quality; Strategic Substitutes; Strategic Complements; Advertising; Business-stealing; Readership-expansion; Opting Out.;

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    References

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    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. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06.
    3. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    4. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    5. Jeon, Doh-Shin & Menicucci, Domenico, 2009. "Interconnection among Academic Journal Websites: Multilateral versus Bilateral Interconnection," TSE Working Papers 09-102, Toulouse School of Economics (TSE).
    6. Doh-Shin Jeon & Jean-Charles Rochet, 2010. "The Pricing of Academic Journals: A Two-Sided Market Perspective," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 222-55, May.
    7. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    8. Chrysanthos Dellarocas & Zsolt Katona & William Rand, 2010. "Media, Aggregators and the Link Economy: Strategic Hyperlink Formation in Content Networks," Working Papers 10-13, NET Institute.
    9. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
    10. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
    11. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
    12. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.
    13. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
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    Citations

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    Cited by:
    1. Joan Calzada & Guillem Ordóñez, 2012. "Competition in the news industry: fighting aggregators with versions and links," Working Papers 12-22, NET Institute.

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