Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing
AbstractThe anomalous inverse concentration-price relationship observed by some researchers in the newspaper market has been attributed to scale economies. In this paper we suggest that the newspaper's (or magazine's) double-product feature (i.e., news supplied to readers and advertising space supplied to advertisers) is the main source of this anomaly. In a simple oligopoly model it is shown how a profit-maximizing publisher takes advantage of that feature. Empirically an inverse concentration-price relationship may arise if double-product pricing is not controlled for. Regression results for a cross-section of 222 German Newspapers and magazines corroborate the theoretical implications. --
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Bibliographic InfoPaper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 14.
Date of creation: 1998
Date of revision:
Scale Economics; Advertising; Concentration; Pricing Behavior;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
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- Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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- Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-75, March.
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