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Price Competition, Advertising and Media Market Concentration


  • Häckner, Jonas

    () (Dept. of Economics, Stockholm University)

  • Nyberg, Sten

    () (Dept. of Economics, Stockholm University)


In media markets, the value of advertisement exposure depends on circulation, and media consumers’ valuation is affected by advertising. This paper analyzes media market competition in a duopoly framework. There exist symmetric and asymmetric equilibria in terms of firm size. There is less scope for asymmetry when products are more differentiated or of higher intrinsic quality. Some media exhibit public good features. This increases the scope for asymmetry when consumers value advertising positively. If their valuation is negative only symmetric equilibria exist. Regulations limiting price competition increase the scope for natural monopoly. Finally, monopoly is a less likely outcome in subscription-based media markets.

Suggested Citation

  • Häckner, Jonas & Nyberg, Sten, 2000. "Price Competition, Advertising and Media Market Concentration," Research Papers in Economics 2000:3, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2000_0003

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    References listed on IDEAS

    1. Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-275, March.
    2. Ferguson, James M, 1983. "Daily Newspaper Advertising Rates, Local Media Cross-Ownership, Newspaper Chains, and Media Competition," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 635-654, October.
    3. Dertouzos, James N & Trautman, William B, 1990. "Economic Effects of Media Concentration: Estimates from a Model of the Newspaper Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 1-14, September.
    4. Chaudhri, Vivek, 1998. "Pricing and efficiency of a circulation industry: The case of newspapers," Information Economics and Policy, Elsevier, vol. 10(1), pages 59-76, March.
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    Cited by:

    1. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics.
    2. Nilssen, Tore & Sørgard, Lars, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series qt2zp943hj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    3. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2005. "Advertising, Competition and Entry in Media Industries," CESifo Working Paper Series 1591, CESifo Group Munich.
    4. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
    5. Anthony Dukes & Esther Gal–Or, 2003. "Negotiations and Exclusivity Contracts for Advertising," Marketing Science, INFORMS, vol. 22(2), pages 222-245, November.
    6. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," CESifo Working Paper Series 1776, CESifo Group Munich.
    7. Kremhelmer, Susanne & Zenger, Hans, 2008. "Advertising and the screening role of mass media," Information Economics and Policy, Elsevier, vol. 20(2), pages 107-119, June.
    8. Susanne Kremhelmer & Hans Zenger, 2004. "Advertising and the Media," Industrial Organization 0403003, EconWPA.
    9. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 133, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    10. Pekka Ahtiala, 2003. "Content, Advertising, and Circulation in an Optimizing Model of the Media Firm," Working Papers 0325, University of Tampere, School of Management, Economics.

    More about this item


    Market Concentration; Oligopoly; Demand Externalities; Advertising; Media Markets;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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