Prices and Network Effects in Two-Sided Markets: The Belgian Newspaper Industry
Patrick J. G. Van Cayseele
KU Leuven - Department of Economics
Hogeschool-Universiteit Brussel (HUBrussel); KU Leuven - Centre for Institutions and Economic Performance (LICOS)
February 26, 2009
This paper investigates the two-sided nature of the newspaper industry. We explicitly take into account cross network effects that exist between advertisers and newspaper readers. On one side, advertisers' demand for publicity space depends on the number of newspaper readers and their characteristics. On the other side, readers' demand can be, positively or negatively, influenced by the number of advertisements. In addition, editors may own several newspapers and hence a variety of cross-market effects that result from changes in market prices exist. To estimate demand parameters for both sides of the market, a specific structural model is needed that takes into account those effects. We estimate network effects and price elasticities for Belgian newspaper publishers to assess market power and the degree of competition in the market, which experienced a large consolidation wave over the last decades. This allows us to evaluate a recent merger in the Belgian newspaper industry.
Number of Pages in PDF File: 36
Keywords: two-sided markets, newspapers, demand estimation
JEL Classification: L11, L82, C23
Date posted: May 14, 2009 ; Last revised: May 29, 2009
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