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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 Group Munich.
  • Handle: RePEc:ces:ceswps:_3096
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3096.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    magazine competition; multi-purchase; incremental pricing; content competition;

    JEL classification:

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

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