Advertising and the rise of the free daily newspapers
We analyze the competition between two newspapers in a vertical differentiation model where the qualities of the journals are determined endogenously in the first stage of the game. We show that when the advertising revenues per reader increase there is a critical value above which the quality of the low quality newspaper discontinuously falls while it becomes similtaneously a free newspaper. This is beneficial to the high quality journal and detrimental to the readers.
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