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Platform competition for advertisers and users in media markets

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  • Reisinger, Markus

Abstract

This paper analyzes a two-sided market model in which platforms compete for advertisers and users. Platforms are differentiated from the users' perspective but are homogenous for advertisers. I show that, although there is Bertrand competition for advertisers, platforms obtain positive margins in the advertising market. In addition, platforms' profits can increase in the users' nuisance costs of advertising. As a general insight, I obtain that factors affecting competition in the user market in a well-known direction without externalities now have opposing effects due to competition in the advertiser market. The model can also explain why private TV platforms benefit if their public rivals are regulated to advertise less—a result at odds with models in which there is no competition for advertisers.

Suggested Citation

  • Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:243-252
    DOI: 10.1016/j.ijindorg.2011.10.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    2. Sahm, Marco & Greiner, Tanja, 2016. "How Effective Are Advertising Bans? On the Demand for Quality in Two-Sided Media Markets," Annual Conference 2016 (Augsburg): Demographic Change 145724, Verein für Socialpolitik / German Economic Association.
    3. repec:kap:jeczfn:v:120:y:2017:i:3:d:10.1007_s00712-016-0507-3 is not listed on IDEAS
    4. Anderson, Simon P & Foros, Øystein & Kind, Hans Jarle, 2015. "Competition for advertisers and for viewers in media markets," CEPR Discussion Papers 10608, C.E.P.R. Discussion Papers.
    5. Debora Di Gioacchino & Alina Verashchagina, 2017. "Mass media and attitudes to inequality," Working Papers 178, University of Rome La Sapienza, Department of Public Economics.
    6. Maria Battaggion & Alessandro Vaglio, 2015. "Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 209-228, June.
    7. Philipp Dimakopoulos & Slobodan Sudaric, 2017. "Privacy and Platform Competition," Working Papers 2017003, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    8. Dimakopoulos, Philipp & Sudaric, Slobodan, 2018. "Privacy and Platform Competition," Rationality and Competition Discussion Paper Series 67, CRC TRR 190 Rationality and Competition.
    9. von Ehrlich, Maximilian & Greiner, Tanja, 2013. "The role of online platforms for media markets — Two-dimensional spatial competition in a two-sided market," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 723-737.
    10. Volodymyr Bilotkach & Nicholas G. Rupp & Vivek Pai, 2013. "Value of a Platform to a Seller: Case of American Airlines and Online Travel Agencies," Working Papers 13-08, NET Institute.
    11. Xu, Jun, 2013. "A two-sided market model of optimal price structure for instant messenger," MPRA Paper 62960, University Library of Munich, Germany.
    12. Kim, Sung-min, 2014. "Policy on the media platform industry: The analysis of pricing policies of internet media with two-sided market theory," 25th European Regional ITS Conference, Brussels 2014 101395, International Telecommunications Society (ITS).
    13. Thomes, Tim Paul, 2013. "An economic analysis of online streaming music services," Information Economics and Policy, Elsevier, vol. 25(2), pages 81-91.
    14. Roß Wiebke & Weghake Jens, 2015. "10 Jahre YouTube: Von dem Aufstieg einer Plattform und der Entwicklung neuer Märkte zum Kollateralschaden einer Google-Regulierung? / 10 Years YouTube: From the Arising of a Platform and the Developme," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 66(1), pages 195-220, January.
    15. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    16. Kibae Kim & Songhee Kang & Jorn Altmann, 2014. "Cloud Goliath Versus a Federation of Cloud Davids: Survey of Economic Theories on Cloud Federation," TEMEP Discussion Papers 2014117, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jul 2014.
    17. 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.

    More about this item

    Keywords

    Platform competition; Two-sided markets; Advertising; Indirect externalities;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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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