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Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or both?

Author

Listed:
  • Simon P. Anderson
  • Oystein Foros
  • Hans Jarle Kind

Abstract

Equilibrium prices behave quite differently if consumers single-purchase (buy either Time Magazine or Newsweek) or if some consumers multi-purchase (buy both). Prices are strategic complements under single-purchase, and increase with magazine quality. In a multi-purchase regime prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with magazine quality due to overlapping content. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase. We determine when each regime holds, and present a detailed reaction function analysis which applies more generally to duopoly pricing.

Suggested Citation

  • Simon P. Anderson & Oystein Foros & Hans Jarle Kind, 2010. "Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or both?," CESifo Working Paper Series 3096, CESifo.
    • Handle: RePEc:ces:ceswps:_3096
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp3096.pdf
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    References listed on IDEAS

    as
    1. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    2. de Palma, Andre & Leruth, Luc & Regibeau, Pierre, 1999. "Partial compatibility with network externalities and double purchase," Information Economics and Policy, Elsevier, vol. 11(2), pages 209-227, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    2. Dietl Helmut & Lang Markus & Lin Panlang, 2023. "The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(1), pages 291-326, January.
    3. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2012. "Media market concentration, advertising levels, and ad prices," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 321-325.
    4. Matthew Gentzkow & Jesse M. Shapiro, 2015. "Ideology and Online News," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 169-190, National Bureau of Economic Research, Inc.
    5. Chen, Yu-Fu & Funke, Michael, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," SIRE Discussion Papers 2010-48, Scottish Institute for Research in Economics (SIRE).
    6. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    7. Rudiger, Jesper, 2013. "Cross-Checking the Media," MPRA Paper 51786, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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