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Valuing New Goods in a Model with Complementarities: Online Newspapers


  • Matthew Gentzkow


Many important economic questions hinge on the extent to which new goods either crowd out or complement consumption of existing products. Recent methods for studying new goods are based on demand models that rule out complementarity by assumption, so their applicability to these questions has been limited. I develop a new model that relaxes this restriction, and use it to study the specific case of competition between print and online newspapers. Using new micro data from the Washington DC market, I show that the major print and online papers appear to be strong complements in the raw data, but that this is an artifact of unobserved consumer heterogeneity. I estimate that the online paper reduced print readership by 27,000 per day, at a cost of $5.5 million per year in lost print profits. I find that online news has provided substantial welfare benefits to consumers and that charging positive online prices is unlikely to substantially increase firm profits.

Suggested Citation

  • Matthew Gentzkow, 2006. "Valuing New Goods in a Model with Complementarities: Online Newspapers," NBER Working Papers 12562, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12562
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    Cited by:

    1. Ricardo Ribeiro & João Vareda, 2007. "Crowding Out or Complementarity in the Telecommunications Market?," Working Papers 07-33, NET Institute, revised Sep 2007.
    2. Matttia De' Grassi Di Pianura, 2012. "Subsidising network technology adoption the case of publishers and E-readers," Working Papers hal-00714447, HAL.
    3. Andrea Pozzi, 2011. "Who Is Hurt by E-Commerce? Crowding out and Business Stealing in Online Grocery," EIEF Working Papers Series 1114, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2011.
    4. Laura Nurski, 2012. "Net Neutrality, Foreclosure and the Fast Lane: An empirical study of the UK," Working Papers 12-13, NET Institute.
    5. Luis Alberto Zuleta J. & Sandra Zuluaga & Alejandro Becerra & Astrid Bermúdez, 2009. "Efectos de la coyuntura y de las tendencias tecnológicas sobre los diarios impresos en Colombia," INFORMES DE INVESTIGACIÓN 009061, FEDESARROLLO.
    6. Ulrich Kaiser & Hans Christian Kongsted, 2005. "Do Magazines' "Companion Websites" Cannibalize the Demand for the Print Version?," CAM Working Papers 2005-07, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    7. Hong, Seung-Hyun, 2007. "The recent growth of the internet and changes in household-level demand for entertainment," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 304-318, October.
    8. Stühmeier, Torben, 2011. "Das Leistungsschutzrecht für Presseverleger: Eine ordnungspolitische Analyse," DICE Ordnungspolitische Perspektiven 12, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Robin S. Lee, 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2960-3000, December.
    10. Steven T. Berry & Philip A. Haile, 2014. "Identification in Differentiated Products Markets Using Market Level Data," Econometrica, Econometric Society, vol. 82, pages 1749-1797, September.
    11. Steven Berry & Amit Gandhi & Philip Haile, 2013. "Connected Substitutes and Invertibility of Demand," Econometrica, Econometric Society, vol. 81(5), pages 2087-2111, September.
    12. Matthew Gentzkow & Jesse M. Shapiro, 2010. "What Drives Media Slant? Evidence From U.S. Daily Newspapers," Econometrica, Econometric Society, vol. 78(1), pages 35-71, January.
    13. Lesley Chiou, 2005. "Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart,, and Their Competitors," Occidental Economics Working Papers 3, Occidental College, Department of Economics, revised Nov 2006.
    14. Shrihari Sridhar & Srinivasaraghavan Sriram, 2015. "Is online newspaper advertising cannibalizing print advertising?," Quantitative Marketing and Economics (QME), Springer, vol. 13(4), pages 283-318, December.
    15. Naoki Wakamori, 2011. "Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market," Staff Working Papers 11-27, Bank of Canada.
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    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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