Price Discrimination in a Two-Sided Market: Theory and Evidence from the Newspaper Industry
AbstractWe investigate theoretically and empirically the determinants of second-degree price discrimination in two-sided markets. We build a model in which a newspaper must attract both readers and advertisers. Readers are uncertain as to their future benefit from reading, and heterogeneous in their taste for reading. Advertisers are heterogeneous in their outside option, taste for subscribers, and taste for occasional buyers. To estimate empirically the effect of the advertisers' side of the industry on price discrimination on the readers' side, we use a "quasi-natural experiment". We exploit the introduction of advertisement on French Television in 1968, which we treat as a negative shock on advertisement revenues of daily national newspapers (treated group), but not on daily local newspapers (control group). We build a new dataset on French local newspapers between 1960 and 1974 and perform a Differences-in-Differences analysis. We find robust evidence of increased price discrimination as a result of a drop in advertisement revenues.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 13-13.
Length: 22 pages
Date of creation: Sep 2013
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Newspaper Industry; Second-Degree Price Discrimination; Two-Sided Markets;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-COM-2013-10-05 (Industrial Competition)
- NEP-CUL-2013-10-05 (Cultural Economics)
- NEP-IND-2013-10-05 (Industrial Organization)
- NEP-MKT-2013-10-05 (Marketing)
- NEP-NET-2013-10-05 (Network Economics)
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