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TWO-SIDED MARKETS WITH PECUNIARY AND PARTICIPATION EXTERNALITIES -super-

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  • MARKUS REISINGER
  • LUDWIG RESSNER
  • RICHARD SCHMIDTKE

Abstract

The existing literature on two-sided markets addresses participation externalities, but it has neglected pecuniary externalities between platforms. In this paper we build a model that incorporates both externalities. In our set-up, differentiated platforms compete in advertising levels and offer consumers a service free of charge that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, we find that platform profits can increase with market entry and that there are cases in which the level of advertising rises with entry. We also consider endogenous entry and provide a welfare analysis. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Markus Reisinger & Ludwig Ressner & Richard Schmidtke, 2009. "TWO-SIDED MARKETS WITH PECUNIARY AND PARTICIPATION EXTERNALITIES -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 32-57, March.
  • Handle: RePEc:bla:jindec:v:57:y:2009:i:1:p:32-57
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    References listed on IDEAS

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    Cited by:

    1. Stühmeier, Torben & Wenzel, Tobias, 2011. "Getting beer during commercials: Adverse effects of ad-avoidance," Information Economics and Policy, Elsevier, pages 98-106.
    2. Stühmeier, Torben & Wenzel, Tobias, 2010. "Getting beer during commercials: adverse effects of ad-avoidance," DICE Discussion Papers 02, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Stuehmeier, Torben & Wenzel, Tobias, 2009. "Getting beer during commercials: adverse effects of Ad-Avoidance," FAU Discussion Papers in Economics 10/2009, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    4. Rennhoff, Adam D. & Wilbur, Kenneth C., 2012. "Local media ownership and media quality," Information Economics and Policy, Elsevier, pages 231-242.
    5. Irina Suleymanova & Christian Wey, 2012. "On the role of consumer expectations in markets with network effects," Journal of Economics, Springer, vol. 105(2), pages 101-127, March.
    6. Robert Baumann & Bryan Engelhardt & Victor Matheson & Taylor Ciavarra, 2009. "Sports Franchises, Stadiums, and City Livability: An Examination of Professional Sports and Crime Rates," Working Papers 0913, College of the Holy Cross, Department of Economics.
    7. Dietl Helmut & Duschl Tobias & Franck Egon & Lang Markus, 2012. "A Contest Model of a Professional Sports League with Two-Sided Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, pages 336-359.
    8. Dewenter, Ralf & Haucap, Justus & Wenzel, Tobias, 2011. "Semi-collusion in media markets," International Review of Law and Economics, Elsevier, pages 92-98.
    9. Dietl Helmut & Duschl Tobias & Franck Egon & Lang Markus, 2012. "A Contest Model of a Professional Sports League with Two-Sided Markets," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, pages 336-359.
    10. Stühmeier, Torben & Wenzel, Tobias, 2012. "Regulating advertising in the presence of public service broadcasting," DICE Discussion Papers 41, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, pages 1-23.
    12. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, pages 243-252.
    13. Thöne, Miriam & Rasch, Alexander & Wenzel, Tobias, 2016. "Business models in commercial media markets: Bargaining, advertising, and mixing," Annual Conference 2016 (Augsburg): Demographic Change 145785, Verein für Socialpolitik / German Economic Association.

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