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Collusion and the political differentiation of newspapers

  • Marco Antonielli

    ()

    (Barcelona Graduate School in Economics)

  • Lapo Filistrucchi

    ()

    (CentER, TILEC, Tilburg University and Department of Economics, University of Florence)

We analyse a newspaper market where two editors first choose the political position of their newspaper, then set cover prices and advertising tariffs. We build on the work of Gabszewicz, Laussel and Sonnac (2001, 2002), whose model we take as the stage game of an infinitely repeated game, and investigate the incentives to collude and the properties of the collusive agreements in terms of welfare and pluralism. We analyse and compare two forms of collusion: in the first, publishers cooperatively select both prices and political position; in the second, publishers cooperatively select prices only. Whereas the first leads to intermediate product differentiation, the second leads, as in Gabszewicz, Laussel and Sonnac (2001, 2002), to minimal product differentiation. However, in the latter case, differently from Gabszewicz, Laussel and Sonnac (2001, 2002), cover prices are positive and the minimal differentiation outcome does not depend on the size of the advertising market. We thus show that collusion on prices reinforces the tendency towards a Pensée Unique discussed in Gabszewicz, Laussel and Sonnac (2001).Our findings question the rationale for Joint Operating Agreements among US newspapers, which allow publishers to cooperate in setting cover prices and advertising tariffs but not the editorial line

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Paper provided by NET Institute in its series Working Papers with number 11-26.

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Length: 59 pages
Date of creation: Sep 2011
Date of revision: Nov 2011
Handle: RePEc:net:wpaper:1126
Contact details of provider: Web page: http://www.NETinst.org/

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