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Newspapers and Advertising: The Effects of Ad-Valorem Taxation under Duopoly

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  • Hans Jarle Kind

    ()
    (Norwegian School of Economics and Business Administration) Bergen, Norway)

  • Guttorm Schjelderup

    ()
    (Norwegian School of Economics and Business Administration) Bergen, Norway)

  • Frank Staehler

    ()
    (Department of Economics, University of Otago)

Abstract

Newspapers are two-sided platforms that sell their product both to readers and advertisers. Media firms in general, and newspapers in particular, are considered important providers of information, culture and language in most countries. Newspapers are therefore given preferential tax treatment. We show that lower ad valorem taxes lead newspapers to become more differentiated. Thereby the competitive pressure falls, possibly resulting in higher newspaper prices and reduced quality investments.

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File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_0609.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by University of Otago, Department of Economics in its series Working Papers with number 0609.

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Length: 20 pages
Date of creation: Dec 2006
Date of revision: Dec 2006
Handle: RePEc:otg:wpaper:0609

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Keywords: Two-sided markets; ad-valorem taxes;

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  1. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, 2000. "Does press advertising foster the “pensée unique”?," CORE Discussion Papers 2000008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. 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.
  3. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  4. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  5. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.
  6. S. P. Anderson & A. de Palma & B. Kreider, 2000. "Tax Incidence in Differentiated Product Oligopoly," THEMA Working Papers 2000-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. Dierickx, I. & Matutes, C. & Neven, D., 1988. "Indirect taxation and cournot equilibrium," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 385-399.
  8. S. P. Anderson & A. de Palma & B. Kreider, 1999. "The efficiency of indirect taxes under imperfect competition," THEMA Working Papers 99-09, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
  10. Peitz, Martin & Valletti, Tommaso, 2004. "Content and Advertising in the Media: Pay-TV versus Free-To-Air," CEPR Discussion Papers 4771, C.E.P.R. Discussion Papers.
  11. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  12. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
  13. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2007. "Taxation in Two-Sided Markets," Discussion Papers 2007/3, Department of Business and Management Science, Norwegian School of Economics.
  14. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
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