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Network Effects in the Press and Advertising Industries

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  • Jean J, Gabszewicz

    (Crest)

  • Didier Laussel

    (Crest)

  • Nathalie Sonnac

    (Crest)

Abstract

Generally, economists interested in network effects analyse these effects when the consumption externalitycreated by the demand for the good is produced inside the industry itself. But it can be conceived that network effects takeplace from one industry to another. This happens when the utility of a good produced in a given industry varies with thesize of the demand for a product produced in another industry. A particularly significant example of this phenomenon isprovided by the interaction between the media and advertising industries. To illustrate this consequences of this two-sidedeffects, we consider an editor who is a monopolist both in the press and advertising markets. In both markets, he facesa continuum of customers. In the press industry, these customers (readers) vary according top their willingness to payfor the newspaper, but also with their attitudes toward advertising: some of them are advertising-lovers while the otherare advertising-averse. On the adverting market, advertisers vary according to their willingness to pay for an ad in thenewspaper, which also depends positively on its readership's size. We characterise the monopoly solution in terms of themonopolist's instruments: the price of the newspaper and the advertising rate.

Suggested Citation

  • Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2003. "Network Effects in the Press and Advertising Industries," Working Papers 2003-20, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2003-20
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    References listed on IDEAS

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    1. Simon P. Anderson & Stephen Coate, 2000. "Market Provision of Public Goods: The Case of Broadcasting," NBER Working Papers 7513, National Bureau of Economic Research, Inc.
    2. Nathalie Sonnac, 2000. "Readers' Attitudes Toward Press Advertising: Are They Ad-Lovers or Ad-Averse?," Journal of Media Economics, Taylor & Francis Journals, vol. 13(4), pages 249-259.
    3. Grilo, Isabel & Shy, Oz & Thisse, Jacques-Francois, 2001. "Price competition when consumer behavior is characterized by conformity or vanity," Journal of Public Economics, Elsevier, vol. 80(3), pages 385-408, June.
    4. Nicholas Kaldor, 1950. "The Economic Aspects of Advertising," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 18(1), pages 1-27.
    5. Brown, Tom J & Rothschild, Michael L, 1993. "Reassessing the Impact of Television Advertising Clutter," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(1), pages 138-146, June.
    6. Thompson, R Stephen, 1989. "Circulation versus Advertiser Appeal in the Newspaper Industry: An Empirical Investigation," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 259-271, March.
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    Cited by:

    1. Cortade, Thomas, 2006. "A Strategic Guide on Two-Sided Markets Applied to the ISP Market," MPRA Paper 2602, University Library of Munich, Germany.

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