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Free daily newspapers: too many incentives to print?

Listed author(s):
  • João Correia-da-Silva


    (CEF.UP and Faculdade de Economia, Universidade do Porto)

  • Joana Resende


    (CEF.UP and Faculdade de Economia, Universidade do Porto)

We consider a model in which a free daily newspaper distributes news to readers and sells ad-space to advertisers, having private information about its readership. Depending on the type of readers in the market, the newspaper's may have a "plentiful and seeking" audience or a "lacking and avoiding" audience. We find that if the readers are plentiful and seeking, the newspaper prints an excessive number of copies. The rationale for this over-printing strategy lies on the newspaper's need to send a credible signal to the advertisers that there are plentiful and seeking readers in the market. When the readers are lacking and avoiding, the newspaper chooses the socially optimal tirage (does not try to cheat the advertisers).

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 350.

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Length: 21 pages
Date of creation: Dec 2009
Handle: RePEc:por:fepwps:350
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