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Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing

Author

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  • Lehmann, Erik
  • Weigand, Jürgen

Abstract

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.

Suggested Citation

  • Lehmann, Erik & Weigand, Jürgen, 1998. "Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing," Thuenen-Series of Applied Economic Theory 14, University of Rostock, Institute of Economics.
  • Handle: RePEc:zbw:roswps:14
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    References listed on IDEAS

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    1. Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-275, March.
    2. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-287, August.
    3. Ferguson, James M, 1983. "Daily Newspaper Advertising Rates, Local Media Cross-Ownership, Newspaper Chains, and Media Competition," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 635-654, October.
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Scale Economics; Advertising; Concentration; Pricing Behavior;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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