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Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships

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  • Reisinger, Markus
  • Ambrus, Attila
  • Calvano, Emilio
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    Abstract

    This paper develops a fairly general model of platform competition in media markets allowing viewers to use multiple platforms. This leads to a new form of competition between platforms, in which they do not steal viewers from each other, but affect the viewer composition and thereby the resulting value of a viewer for the other platform. We label this form of competition "either or both." A central result is that platform ownership does not affect advertising levels, despite nontrivial strategic interaction between platforms. This result holds for general viewer demand functions and is robust to allowing for viewer fees. We show that the equilibrium advertising level is inefficiently high. We also demonstrate that entry of a platform leads to an increase in the advertising level if viewers' preferences for the platforms are negatively correlated, which contrasts with predictions of standard models with either/or competition. We validate this result in an empirical analysis using panel data for the U.S. cable television industry. --

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    Bibliographic Info

    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79912.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79912

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    Web page: http://www.socialpolitik.org/
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    1. Ambrus, Attila & Argenziano, Rossella, 2009. "Asymmetric Networks in Two-Sided Markets," Scholarly Articles 3204916, Harvard University Department of Economics.
    2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    3. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2006. "Competition for Viewers and Advertisers in a TV Oligopoly," CESifo Working Paper Series 1862, CESifo Group Munich.
    4. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    5. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    6. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
    7. Argenziano, Rossella & Ambrus, Attila, 2009. "Asymmetric Networks in Two-sided Markets," Scholarly Articles 4589709, Harvard University Department of Economics.
    8. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
    9. Crampes, Claude & Haritchabalet, Carole & Jullien, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers 374, Institut d'Économie Industrielle (IDEI), Toulouse.
    10. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
    11. Susan Athey & Emilio Calvano & Joshua Gans, 2013. "The Impact of the Internet on Advertising Markets for News Media," NBER Working Papers 19419, National Bureau of Economic Research, Inc.
    12. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
    13. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    14. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.
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    Cited by:
    1. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.

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