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Prices, Margins and Liquidity Constraints: Swedish Newspapers, 1990-1992

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  • Marcus Asplund
  • Rickard Eriksson
  • Niklas Strand

Abstract

A firm facing liquidity constraints in a recession may increase its price to exploit locked-in consumers in an attempt to boost short-run profits. We find support for such behaviour for Swedish regional newspapers during a deep recession. Newspapers sell both subscriptions and advertising space, and arguably buyers of the latter are less locked in. Newspapers with low solvency raised their subscription prices relative to others. In contrast, the changes in advertising price were independent of the newspapers' financial positions. Hence financial constraints affected firms' pricing behaviour only when consumers were locked in. Copyright (c) The London School of Economics and Political Science 2005.

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  • Marcus Asplund & Rickard Eriksson & Niklas Strand, 2005. "Prices, Margins and Liquidity Constraints: Swedish Newspapers, 1990-1992," Economica, London School of Economics and Political Science, vol. 72(286), pages 349-359, May.
  • Handle: RePEc:bla:econom:v:72:y:2005:i:286:p:349-359
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    Cited by:

    1. Takanori Tanaka, 2010. "Corporate financing and product market competition: evidence from firm-level data in Japan," Economics Bulletin, AccessEcon, vol. 30(2), pages 1373-1383.
    2. Balleer, Almut & Hristov, Nikolay & Menno, Dominik, 2017. "Financial Constraints and Nominal Price Rigidities," CEPR Discussion Papers 11790, C.E.P.R. Discussion Papers.
    3. Ioana A. Duca & José M. Montero & Marianna Riggi & Roberta Zizza, 2017. "I will survive. Pricing strategies of financially distressed firms," Temi di discussione (Economic working papers) 1106, Bank of Italy, Economic Research and International Relations Area.
    4. Marcus Asplund & Rickard Eriksson & Niklas Strand, 2008. "PRICE DISCRIMINATION IN OLIGOPOLY: EVIDENCE FROM REGIONAL NEWSPAPERS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 333-346, June.
    5. Takeshi Kimura, 2009. "Financial Constraints and Firms' Pricing Decisions," Bank of Japan Working Paper Series 09-E-4, Bank of Japan.

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