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Free daily newspapers: too strong incentives to print?

Author

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  • João Correia-da-Silva
  • Joana Resende

Abstract

A free daily newspaper distributes news to readers and sells ad-space to advertisers, having private information about its audience. For a given number of distributed copies, depending on the type of audience (favorable or unfavorable), the newspaper may either have a large readership or a small readership. A large readership provides a greater return to advertisers, because ads are visualized by more people. A favorable audience has also the advantage of requiring a lower distribution cost (for a given number of distributed copies), because readers are willing to exert more effort to obtain a copy of the free newspaper and are less likely to reject a copy that is handed to them. We find that when the audience is unfavorable, the number of distributed copies and the price of ad-space coincide with those of the perfect information scenario. In contrast, if the audience is favorable, the newspaper prints extra copies to send a credible signal to the advertisers that the audience is favorable. Overprinting is not necessarily welfare-detrimental since readers benefit from the existence of additional copies. Copyright ISEG 2013

Suggested Citation

  • João Correia-da-Silva & Joana Resende, 2013. "Free daily newspapers: too strong incentives to print?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(2), pages 113-130, August.
    • Handle: RePEc:spr:portec:v:12:y:2013:i:2:p:113-130
    DOI: 10.1007/s10258-013-0090-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric information; Two-sided markets; Free press; D82; D86; L82;
    All these keywords.

    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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