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Nonlinear Pricing of Japanese Newspapers


  • David Flath


In Japan, the newspapers with the greatest daily circulation offer both morning and evening editions in most of their distribution areas. Their prices per page of actual content are different for morning-and-evening subscribers than for morning-only subscribers. So the subscription price schedules could be described as sliding scales. These are tariff schedules that are step functions, and thus nonlinear. My focus is on two aspects of nonlinear pricing by Japanese newspapers. The first is that pricing and circulation of the differing editions reveal parameters of the demand for newspaper content. I estimate these parameters using nonlinear least squares and find that price elasticity of demand is around 1.2, while elasticity of demand with respect to pages of content is around 0.5. Estimates from micro-data have price elasticity around 1.3 and elasticity with respect to pages of content around 0.4. The second aspect of nonlinear pricing on which I focus is the distorting effect of demanders' incentive compatibility constraints on the newspaper publishers' choice of newspaper content. The newspaper publishers wastefully reduce the number of pages of content of their morning editions to deter morning-and-evening subscribers from cancelling their evening subscriptions. It is wasteful in the sense that the marginal value to subscribers of an additional page of content in the morning edition is less than the marginal cost.

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  • David Flath, 2012. "Nonlinear Pricing of Japanese Newspapers," ISER Discussion Paper 0851, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0851

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    References listed on IDEAS

    1. Meghan Busse & Marc Rysman, 2005. "Competition and Price Discrimination in Yellow Pages Advertising," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 378-390, Summer.
    2. Brian McManus, 2007. "Nonlinear pricing in an oligopoly market: the case of specialty coffee," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 512-532, June.
    3. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
    4. Van Cayseele, Patrick & Vanormelingen, Stijn, 2009. "Prices and Network Eects in Two-Sided Markets: the Belgian Newspaper Industry," Working Papers 2009/06, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    5. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier.
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