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

  • Charles Angelucci

    ()

    (Harvard University)

  • Julia Cage

    ()

    (Harvard University)

  • Romain de Nijs

    ()

    (Paris School of Economics)

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.

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Paper provided by NET Institute in its series Working Papers with number 13-13.

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Length: 22 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:net:wpaper:1313
Contact details of provider: Web page: http://www.NETinst.org/

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  1. Elena Argentesi & Lapo Filistrucchi, 2005. "Estimating market power in a two-sided market: the case of newspapers," Economics Working Papers ECO2005/07, European University Institute.
  2. Glazer, Amihai & Hassin, Refael, 1982. "On the economics of subscriptions," European Economic Review, Elsevier, vol. 19(2), pages 343-356.
  3. Seim, Katja & Viard, V. Brian, 2006. "The Effect of Market Structure on Cellular Technology Adoption and Pricing," Research Papers 1876r, Stanford University, Graduate School of Business.
  4. Qihong Liu & Konstantinos Serfes, 2007. "Price Discrimination in Two-Sided Markets," Working Papers 07-25, NET Institute, revised Sep 2007.
  5. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Democratization and Growth," CEPR Discussion Papers 6987, C.E.P.R. Discussion Papers.
  6. 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.
  7. Grubb, Michael D., 2012. "Dynamic nonlinear pricing: Biased expectations, inattention, and bill shock," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 287-290.
  8. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
  9. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, 02.
  10. 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.
  11. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
  12. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
  13. Laporte, Audrey & Windmeijer, Frank, 2005. "Estimation of panel data models with binary indicators when treatment effects are not constant over time," Economics Letters, Elsevier, vol. 88(3), pages 389-396, September.
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