IDEAS home Printed from https://ideas.repec.org/p/hhs/nhheco/2014_016.html
   My bibliography  Save this paper

Inter-Firm Price Coordination in a Two-Sided Market

Author

Listed:
  • Kind, Hans Jarle

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Nilssen, Tore

    (University of Oslo)

  • Sørgard, Lars

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

In many two-sided markets we observe that there is a common distributor on one side of the market. One example is the TV industry, where TV channels choose advertising prices to maximize own profi…t and typically delegate determination of viewer prices to independent distributors. We show that in such a market structure the stronger the competition between the TV channels, the greater will joint profits in the TV industry be. We also show that joint pro…ts might be higher if the wholesale contract between each TV channel and the distributor consists of a simple fixed fee rather than a two-part tariff.

Suggested Citation

  • Kind, Hans Jarle & Nilssen, Tore & Sørgard, Lars, 2014. "Inter-Firm Price Coordination in a Two-Sided Market," Discussion Paper Series in Economics 16/2014, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2014_016
    as

    Download full text from publisher

    File URL: http://brage.bibsys.no/xmlui/bitstream/handle/11250/195307/1/workingpaper.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, September.
    2. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    3. Crawford, Gregory S. & Cullen, Joseph, 2007. "Bundling, product choice, and efficiency: Should cable television networks be offered a la carte?," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 379-404, October.
    4. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    5. Gregory S. Crawford & Ali Yurukoglu, 2012. "The Welfare Effects of Bundling in Multichannel Television Markets," American Economic Review, American Economic Association, vol. 102(2), pages 643-685, April.
    6. Jack H. Beebe, 1977. "Institutional Structure and Program Choices in Television Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 15-37.
    7. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721, Elsevier.
    8. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    9. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
    10. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    11. Jacques Cremer & Michael H. Riordan, 1987. "On Governing Multilateral Transactions with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 436-451, Autumn.
    12. Tommy Staahl Gabrielsen & Bjørn Olav Johansen & Teis Lunde Lømo, 2018. "Resale Price Maintenance In Two‐Sided Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 66(3), pages 570-609, September.
    13. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    14. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
    15. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
    16. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    17. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 33, pages 2145-2220, Elsevier.
    18. Germa Bel & Joan Calzada, 2007. "Access Pricing to a Digital Broadcasting Platform," Journal of Media Economics, Taylor & Francis Journals, vol. 20(1), pages 29-53.
    19. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
    20. Seabright,Paul & von Hagen,Jürgen (ed.), 2007. "The Economic Regulation of Broadcasting Markets," Cambridge Books, Cambridge University Press, number 9780521874052.
    21. Michael Spence & Bruce Owen, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(1), pages 103-126.
    22. Barros Pedro P & Kind Hans Jarle & Nilssen Tore & Sørgard Lars, 2005. "Media Competition on the Internet," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-20, January.
    23. Seabright,Paul & von Hagen,Jürgen (ed.), 2007. "The Economic Regulation of Broadcasting Markets," Cambridge Books, Cambridge University Press, number 9780521696340, September.
    24. Jean-Charles Rochet Author-Email:rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
    25. Peter O. Steiner, 1952. "Program Patterns and Preferences, and the Workability of Competition in Radio Broadcasting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(2), pages 194-223.
    26. William James Adams & Janet L. Yellen, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 475-498.
    27. Wright Julian, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, De Gruyter, vol. 3(1), pages 1-21, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anna D’Annunzio & Antonio Russo, 2020. "Ad Networks and Consumer Tracking," Management Science, INFORMS, vol. 66(11), pages 5040-5058, November.
    2. Baake, Pio & Sudaric, Slobodan, 2019. "Net neutrality and CDN intermediation," Information Economics and Policy, Elsevier, vol. 46(C), pages 55-67.
    3. Qihong Liu & Daniel Nedelescu & Ji Gu, 2021. "The impact of strategic agents in two-sided markets," Journal of Economics, Springer, vol. 134(3), pages 195-218, December.
    4. Balandina, Marina (Баландина, Марина) & Baskakova, Irina (Баскакова, Ирина), 2017. "The role of intermediate agents on the either way market of TV advertising [Роль Посредников На Двустороннем Рынке Телевизионной Рекламы]," Sotsium i vlast / Society and power, Russian Presidential Academy of National Economy and Public Administration, pages 96-103.
    5. Greiner, Tanja & Sahm, Marco, 2018. "How effective are advertising bans? On the demand for quality in two-sided media markets," Information Economics and Policy, Elsevier, vol. 43(C), pages 48-60.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    2. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2010. "Price Coordination in Two-Sided Markets: Competition in the TV Industry," CESifo Working Paper Series 3004, CESifo.
    3. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    4. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?," Marketing Science, INFORMS, vol. 28(6), pages 1112-1128, 11-12.
    5. Behringer, Stefan & Filistrucchi, Lapo, 2015. "Hotelling competition and political differentiation with more than two newspapers," Information Economics and Policy, Elsevier, vol. 30(C), pages 36-49.
    6. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    7. Lapo Filistrucchi & Andrea Mangani & Luigi Luini, 2012. "Banning Ads from Prime-Time State TV: Lessons from France," Working Papers 12-23, NET Institute.
    8. Reisinger, Markus, 2012. "Platform competition for advertisers and users in media markets," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 243-252.
    9. David S. Evans & Richard Schmalensee, 2013. "The Antitrust Analysis of Multi-Sided Platform Businesses," NBER Working Papers 18783, National Bureau of Economic Research, Inc.
    10. Ramon Casadesus-Masanell & Feng Zhu, 2010. "Strategies to Fight Ad-Sponsored Rivals," Management Science, INFORMS, vol. 56(9), pages 1484-1499, September.
    11. Pavan, Alessandro & Jullien, Bruno & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," CEPR Discussion Papers 16480, C.E.P.R. Discussion Papers.
    12. Dietl, Helmut & Lang, Markus & Lin, Panlang, 2013. "Advertising pricing models in media markets: Lump-sum versus per-consumer charges," Information Economics and Policy, Elsevier, vol. 25(4), pages 257-271.
    13. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    14. Ramon Casadesus-Masanell & Feng Zhu, 2009. "Strategies to Fight Ad-sponsored Rivals," Working Papers 09-09, NET Institute, revised Sep 2009.
    15. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    16. Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2007. "Competition for Viewers and Advertisers in a TV Oligopoly," Journal of Media Economics, Taylor & Francis Journals, vol. 20(3), pages 211-233.
    17. Charles Angelucci & Julia Cagé & Michael Sinkinson, 2024. "Media Competition and News Diets," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 62-102, May.
    18. Charles Angelucci & Julia Cagé, 2019. "Newspapers in Times of Low Advertising Revenues," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 319-364, August.
    19. Simon P. Anderson & Joshua S. Gans, 2011. "Platform Siphoning: Ad-Avoidance and Media Content," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 1-34, November.
    20. Stühmeier, Torben, 2011. "Das Leistungsschutzrecht für Presseverleger: Eine ordnungspolitische Analyse," DICE Ordnungspolitische Perspektiven 12, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    Vertical relations; advertising; media economics.;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:nhheco:2014_016. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Karen Reed-Larsen (email available below). General contact details of provider: https://edirc.repec.org/data/sonhhno.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.