Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing
The anomalous inverse concentration-price relationship observed by some researchers in the newspaper market has been attributed to scale economies. In this paper we suggest that the newspaper's (or magazine's) double-product feature (i.e., news supplied to readers and advertising space supplied to advertisers) is the main source of this anomaly. In a simple oligopoly model it is shown how a profit-maximizing publisher takes advantage of that feature. Empirically an inverse concentration-price relationship may arise if double-product pricing is not controlled for. Regression results for a cross-section of 222 German Newspapers and magazines corroborate the theoretical implications.
|Date of creation:||1998|
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- Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-275, March.
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