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Price Discrimination in a Two-Sided Market: Theory and Evidence from the Newspaper Industry

Author

Listed:
  • Charles Angelucci

    () (Harvard University)

  • Julia Cage

    () (Harvard University)

  • Romain de Nijs

    () (Paris School of Economics)

Abstract

We investigate theoretically and empirically the determinants of second-degree price discrimination in two-sided markets. We build a model in which a newspaper must attract both readers and advertisers. Readers are uncertain as to their future benefit from reading, and heterogeneous in their taste for reading. Advertisers are heterogeneous in their outside option, taste for subscribers, and taste for occasional buyers. To estimate empirically the effect of the advertisers' side of the industry on price discrimination on the readers' side, we use a "quasi-natural experiment". We exploit the introduction of advertisement on French Television in 1968, which we treat as a negative shock on advertisement revenues of daily national newspapers (treated group), but not on daily local newspapers (control group). We build a new dataset on French local newspapers between 1960 and 1974 and perform a Differences-in-Differences analysis. We find robust evidence of increased price discrimination as a result of a drop in advertisement revenues.

Suggested Citation

  • Charles Angelucci & Julia Cage & Romain de Nijs, 2013. "Price Discrimination in a Two-Sided Market: Theory and Evidence from the Newspaper Industry," Working Papers 13-13, NET Institute.
  • Handle: RePEc:net:wpaper:1313
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    File URL: http://www.netinst.org/Angelucci_Cage_13-13.pdf
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    References listed on IDEAS

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    3. 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.
    4. Qihong Liu & Konstantinos Serfes, 2013. "Price Discrimination in Two-Sided Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 768-786, December.
    5. Ying Fan, 2013. "Ownership Consolidation and Product Characteristics: A Study of the US Daily Newspaper Market," American Economic Review, American Economic Association, vol. 103(5), pages 1598-1628, August.
    6. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
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    9. Mian Dai & Qihong Liu & Konstantinos Serfes, 2014. "Is the Effect of Competition on Price Dispersion Nonmonotonic? Evidence from the U.S. Airline Industry," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 161-170, March.
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    Cited by:

    1. Julia Cage, 2014. "Media Competition, Information Provision and Political Participation," Sciences Po publications info:hdl:2441/16juu6v6rg8, Sciences Po.
    2. Elias Carroni, 2015. "Behaviour Based Price Discrimination with Cross-Group Externalities," Working Papers 1502, University of Namur, Department of Economics.
    3. Böhme Enrico, 2016. "Second-Degree Price Discrimination on Two-Sided Markets," Review of Network Economics, De Gruyter, vol. 15(2), pages 91-115, June.

    More about this item

    Keywords

    Newspaper Industry; Second-Degree Price Discrimination; Two-Sided Markets;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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