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Free daily newspapers: too many incentives to print?

Author

Listed:
  • João Correia-da-Silva

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

  • Joana Resende

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

Abstract

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).

Suggested Citation

  • João Correia-da-Silva & Joana Resende, 2009. "Free daily newspapers: too many incentives to print?," FEP Working Papers 350, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:350
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    More about this item

    Keywords

    two-sided markets; asymmetric information; free press;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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