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.
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- Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August.
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- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
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