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Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships

Author

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  • Reisinger, Markus
  • Ambrus, Attila
  • Calvano, Emilio

Abstract

This paper develops a fairly general model of platform competition in media markets allowing viewers to use multiple platforms. This leads to a new form of competition between platforms, in which they do not steal viewers from each other, but affect the viewer composition and thereby the resulting value of a viewer for the other platform. We label this form of competition "either or both." A central result is that platform ownership does not affect advertising levels, despite nontrivial strategic interaction between platforms. This result holds for general viewer demand functions and is robust to allowing for viewer fees. We show that the equilibrium advertising level is inefficiently high. We also demonstrate that entry of a platform leads to an increase in the advertising level if viewers' preferences for the platforms are negatively correlated, which contrasts with predictions of standard models with either/or competition. We validate this result in an empirical analysis using panel data for the U.S. cable television industry.

Suggested Citation

  • Reisinger, Markus & Ambrus, Attila & Calvano, Emilio, 2013. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79912, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79912
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    References listed on IDEAS

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    Cited by:

    1. Alexandre Cornière & Greg Taylor, 2014. "Integration and search engine bias," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 576-597, September.
    2. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    3. D'Annunzio, Anna & Russo, Antonio, 2015. "Net Neutrality and internet fragmentation: The role of online advertising," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 30-47.
    4. Anderson, Simon P. & Jullien, Bruno, 2016. "The advertising-financed business model in two-sided media markets," TSE Working Papers 16-632, Toulouse School of Economics (TSE).
    5. Emilio Calvano & Bruno Jullien, 2012. "Issues in Online Advertising and Competition Policy: A Two-sided Market Perspective," Chapters,in: Recent Advances in the Analysis of Competition Policy and Regulation, chapter 9 Edward Elgar Publishing.
    6. Stühmeier, Torben, 2016. "Media market concentration and pluralism," CAWM Discussion Papers 87, University of Münster, Center of Applied Economic Research Münster (CAWM).
    7. Anna D'Annunzio & Antonio Russo, 2017. "Ad Networks, Consumer Tracking, and Privacy," CESifo Working Paper Series 6667, CESifo Group Munich.
    8. Antonio Russo & Anna D'Annunzio, 2013. "Network Neutrality, Access to Content and Online Advertising," KOF Working papers 13-344, KOF Swiss Economic Institute, ETH Zurich.
    9. Anderson, Simon P & Foros, Øystein & Kind, Hans Jarle, 2015. "Competition for advertisers and for viewers in media markets," CEPR Discussion Papers 10608, C.E.P.R. Discussion Papers.
    10. Anna D'Annunzio, 2013. "Vertical Integration in Two-Sided Markets: Exclusive Provision and Program Quality," DIAG Technical Reports 2013-16, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    11. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.
    12. Emilio Calvano & Mihele Polo, 2016. "Strategic Differentiation by Business Models: Free-to-Air and Pay-TV," CSEF Working Papers 438, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 07 Nov 2017.
    13. Jeitschko, Thomas D. & Tremblay, Mark J., 2014. "Homogeneous platform competition with endogenous homing," DICE Discussion Papers 166, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    14. Susan Athey & Emilio Calvano & Joshua Gans, 2013. "The Impact of the Internet on Advertising Markets for News Media," NBER Working Papers 19419, National Bureau of Economic Research, Inc.
    15. Susan Athey & Emilio Calvano & Joshua S. Gans, 2014. "The Impact of Consumer Multi-homing on Advertising Markets and Media Competition," CSEF Working Papers 379, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 27 Apr 2016.
    16. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    17. Andre Boik, 2016. "Intermediaries in Two-Sided Markets: An Empirical Analysis of the US Cable Television Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 256-282, February.
    18. Anderson, Simon P. & Peitz, Martin, 2015. "Media see-saws : winners and losers on media platforms," Working Papers 15-16, University of Mannheim, Department of Economics.
    19. Alexandre de Cornière, 2016. "Search Advertising," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 156-188, August.
    20. Serena Marianna Drufuca & Maria Rosa Battaggion, 2014. "Quality Competition among Platforms: a Media Market Case," Working Papers (2013-) 1403, University of Bergamo, Department of Management, Economics and Quantitative Methods.
    21. Rudiger, Jesper, 2013. "Cross-Checking the Media," MPRA Paper 51786, University Library of Munich, Germany.
    22. Kevin M. Murphy & Ignacio Palacios-Huerta, 2016. "A Theory of Bundling Advertisements in Media Markets," NBER Working Papers 22994, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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