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Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers



This paper investigates the price war in the UK quality newspaper industry in the 1990s. We build a model of the newspaper market which encompasses demand for differentiated products on both, the readers and advertisers side of the market, and profit maximization by four competing oligopolistic editors who recognize the existence of an indirect network effect of circulation on advertising demand. Editors choose first the political position, then simultaneously cover prices and advertising tariffs. We contribute to the literature on two-sided markets by endogenizing the political differentiation of newspapers in a model with more than two firms. We simulate changes to market structure in order to explore which of the candidate explanations is most likely to lie behind the observed price war.

Suggested Citation

  • Stefan Behringer & Lapo Filistrucchi, 2009. "Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers," Working Papers 09-26, NET Institute, revised Dec 2009.
  • Handle: RePEc:net:wpaper:0926

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    References listed on IDEAS

    1. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
    2. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
    3. Gabszewicz, Jean J & Laussel, Didier & Sonnac, Nathalie, 2002. " Press Advertising and the Political Differentiation of Newspapers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 317-334.
    4. Chandra, Ambarish, 2008. "Targeted Advertising: The Role of Subscriber Characteristics in Media Markets," MPRA Paper 7955, University Library of Munich, Germany.
    5. Behringer, Stefan, 2007. "Spacial Predation in the UK Newspaper Industry," MPRA Paper 3242, University Library of Munich, Germany, revised 15 Apr 2007.
    6. Ambarish Chandra & Allan Collard-Wexler, 2009. "Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1045-1070, December.
    7. Jordi Gual & Anne Perrot & Michele Polo & Patrick Rey & Klaus Schmidt & Rune Stenbacka, 2006. "An Economic Approach to Article 82," CPI Journal, Competition Policy International, vol. 2.
    8. 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.
    9. Gotz, Georg, 2005. "Endogenous sequential entry in a spatial model revisited," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 249-261, April.
    10. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
    11. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    12. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
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    Cited by:

    1. Stefan Behringer & Lapo Filistrucchi, 2015. "Areeda–Turner in Two-Sided Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 287-306, May.
    2. Filistrucchi, L. & Geradin, D.A.A.G. & van Damme, E.E.C., 2012. "Identifying Two-Sided Markets," Discussion Paper 2012-008, Tilburg University, Tilburg Law and Economic Center.
    3. Federico Etro, 2012. "Leadership in Multi-sided Markets and Dominance in Online Advertising," Chapters,in: Recent Advances in the Analysis of Competition Policy and Regulation, chapter 11 Edward Elgar Publishing.
    4. Senay Sokullu, 2012. "Nonparametric Analysis of Two-Sided Markets," Bristol Economics Discussion Papers 12/628, Department of Economics, University of Bristol, UK.
    5. Gabszewicz, Jean J. & Resende, Joana, 2012. "Differentiated credence goods and price competition," Information Economics and Policy, Elsevier, vol. 24(3), pages 277-287.
    6. Sagit Bar-Gill, 2013. "Game of Platforms: Strategic Expansion in Two-Sided Markets," Working Papers 13-12, NET Institute.
    7. Motta, Massimo & Vasconcelos, Helder, 2012. "Exclusionary Pricing in a Two-Sided Market," CEPR Discussion Papers 9164, C.E.P.R. Discussion Papers.

    More about this item


    antitrust; two-sided markets; media markets; UK quality newspapers; predation; price wars; advertising; platforms.;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software


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