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Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing

Author

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  • Lehmann, Erik
  • Weigand, Jürgen

Abstract

The anomalous inverse concentration-price relationship observed by some researchers in the newspaper market has been attributed to scale economies. In this paper we suggest that the newspaper's (or magazine's) double-product feature (i.e., news supplied to readers and advertising space supplied to advertisers) is the main source of this anomaly. In a simple oligopoly model it is shown how a profit-maximizing publisher takes advantage of that feature. Empirically an inverse concentration-price relationship may arise if double-product pricing is not controlled for. Regression results for a cross-section of 222 German Newspapers and magazines corroborate the theoretical implications.

Suggested Citation

  • Lehmann, Erik & Weigand, Jürgen, 1998. "Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing," Thuenen-Series of Applied Economic Theory 14, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:14
    as

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    References listed on IDEAS

    as
    1. Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-275, March.
    2. repec:bla:econom:v:49:y:1982:i:195:p:277-87 is not listed on IDEAS
    3. Ferguson, James M, 1983. "Daily Newspaper Advertising Rates, Local Media Cross-Ownership, Newspaper Chains, and Media Competition," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 635-654, October.
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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    More about this item

    Keywords

    Scale Economics; Advertising; Concentration; Pricing Behavior;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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