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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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    More about this item

    Keywords

    Platform competition; Two-sided markets; Advertising; Indirect externalities;
    All these keywords.

    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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