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Price Competition, Advertising and Media Market Concentration

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  • Häckner, Jonas

    (Dept. of Economics, Stockholm University)

  • Nyberg, Sten

    (Dept. of Economics, Stockholm University)

Abstract

In media markets, the value of advertisement exposure depends on circulation, and media consumers’ valuation is affected by advertising. This paper analyzes media market competition in a duopoly framework. There exist symmetric and asymmetric equilibria in terms of firm size. There is less scope for asymmetry when products are more differentiated or of higher intrinsic quality. Some media exhibit public good features. This increases the scope for asymmetry when consumers value advertising positively. If their valuation is negative only symmetric equilibria exist. Regulations limiting price competition increase the scope for natural monopoly. Finally, monopoly is a less likely outcome in subscription-based media markets.

Suggested Citation

  • Häckner, Jonas & Nyberg, Sten, 2000. "Price Competition, Advertising and Media Market Concentration," Research Papers in Economics 2000:3, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2000_0003
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    References listed on IDEAS

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    Cited by:

    1. Marco Antonielli & Lapo Filistrucchi, 2011. "Collusion and the political differentiation of newspapers," Working Papers 11-26, NET Institute, revised Nov 2011.
    2. 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.
    3. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Papers in Economics 963, University of Munich, Department of Economics.
    4. Nilssen, Tore & Sørgard, Lars, 2000. "TV Advertising, Program Quality, and Product-Market Oligopoly," Competition Policy Center, Working Paper Series qt2zp943hj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    5. Claude Crampes & Carole Haritchabalet & Bruno Jullien, 2009. "Advertising, Competition And Entry In Media Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 7-31, March.
    6. Maria Battaggion & Alessandro Vaglio, 2015. "Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(2), pages 209-228, June.
    7. Kremhelmer, Susanne, 2004. "Fairness, Property Rights, and the Market for Media," Munich Dissertations in Economics 2521, University of Munich, Department of Economics.
    8. Esther Gal‐Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, September.
    9. Böhme, Enrico & Müller, Christopher, 2010. "Comparing Monopoly and Duopoly on a Two-Sided Market without Product Differentiation," MPRA Paper 23568, University Library of Munich, Germany.
    10. Enrico Böhme & Christopher Müller, 2013. "Price-Increasing Competition on Two-Sided Markets with Homogeneous Platforms," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 453-479, December.
    11. Mangani, Andrea, 2003. "Profit and audience maximization in broadcasting markets," Information Economics and Policy, Elsevier, vol. 15(3), pages 305-315, September.
    12. Katarina Valaskova & Marek Durica & Maria Kovacova & Elena Gregova & George Lazaroiu, 2019. "Oligopolistic Competition among Providers in the Telecommunication Industry: The Case of Slovakia," Administrative Sciences, MDPI, vol. 9(3), pages 1-15, June.
    13. Armando J. Garcia Pires, 2013. "Media Plurality and the Intensity of Readers' Political Preferences," Journal of Media Economics, Taylor & Francis Journals, vol. 26(1), pages 41-55, March.
    14. Nilssen,T. & Sorgard,L., 2001. "The TV industry : advertising and programming," Memorandum 18/2001, Oslo University, Department of Economics.
    15. Anthony Dukes & Esther Gal–Or, 2003. "Negotiations and Exclusivity Contracts for Advertising," Marketing Science, INFORMS, vol. 22(2), pages 222-245, November.
    16. Richard Schmidtke, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," CESifo Working Paper Series 1776, CESifo.
    17. Kremhelmer, Susanne & Zenger, Hans, 2008. "Advertising and the screening role of mass media," Information Economics and Policy, Elsevier, vol. 20(2), pages 107-119, June.
    18. Susanne Kremhelmer & Hans Zenger, 2004. "Advertising and the Media," Industrial Organization 0403003, University Library of Munich, Germany.
    19. Schmidtke, Richard, 2006. "Two-Sided Markets with Pecuniary and Participation Externalities," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 133, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    20. Pekka Ahtiala, 2003. "Content, Advertising, and Circulation in an Optimizing Model of the Media Firm," Working Papers 0325, Tampere University, Faculty of Management and Business, Economics.

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    More about this item

    Keywords

    Market Concentration; Oligopoly; Demand Externalities; Advertising; Media Markets;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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