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Technology Shocks in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

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Abstract

Theories of multi-sided markets suggest that a platform’s pricing strategies on different sides of the market are closely linked, and in particular, an increase in competition on one side may lead to an increase in price on other sides. We empirically examine platforms’ pricing strategies by exploiting the gradual expansion of Craigslist, a website providing classified ads services, into local newspaper markets. We adopt a differences-in-differences approach by comparing the pricing strategies of local newspapers for which classified ads are likely to be a significant portion of their revenue to others before and after Craigslist’s entry. We find that these newspapers drop their classified ad rates significantly more after Craigslist’s entry. We also find that the impact of the entry of Craigslist propagates to other sides of the newspaper market. These newspapers increase their subscription rates relative to others, and consequently, their circulation also drops more. Finally, lower circulation also leads to lower display ad rates for these newspapers. Our study helps build an understanding of how incumbent media platforms respond to technologically disruptive entrants in multi-sided markets.

Suggested Citation

  • Robert Seamans & Feng Zhu, 2010. "Technology Shocks in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers," Working Papers 10-11, NET Institute.
  • Handle: RePEc:net:wpaper:1011
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    Cited by:

    1. Barrantes, Roxana & Jordán, Valeria & Rojas, Fernando, 2013. "The shifting digital paradigm in Latin America," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37059.
    2. Katz, Raúl L., 2013. "Broadband, digitization and development," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37062, February.
    3. Colciago, Andrea & Etro, Federico, 2013. "Cloud computing, structural change and job creation in SMEs," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37064, February.
    4. León, Omar de, 2013. "Regional and international connectivity," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37061, February.
    5. Bustillo, René, 2013. "The advance of cloud computing," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37068, February.
    6. -, 2013. "Broadband in Latin America: Beyond Connectivity," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 120 edited by Eclac, February.
    7. Katz, Raúl L. & Galperin, Hernán, 2013. "The demand gap: drivers and public policies," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37060, February.
    8. Galperin, Hernán & Mariscal Avilés, Judith & Viecens, María Fernanda, 2013. "National broadband plans," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37065, February.
    9. Bustillo, René, 2013. "Net neutrality: debate and policies," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37067, February.
    10. Choi, Daewon, 2013. "Broadband and industrial policy: the Korean experience..," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37066, February.

    More about this item

    Keywords

    two-sided markets; media markets; newspapers; platforms.;

    JEL classification:

    • 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
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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