Price Wars in Two-Sided Markets: The Case of the UK Quality Newspapers
University of Mainz
Tilburg University, Department of Economics, CentER & TILEC; University of Florence, Dipartimento di Scienze Economiche
November 2, 2009
NET Institute Working Paper No. 09-26
This paper investigates the price war in the UK quality newspaper industry in the 1990s. We build a model of the newspaper market which encompasses demand for differentiated products on both, the readers and advertisers side of the market, and profit maximization by four competing oligopolistic editors who recognize the existence of an indirect network effect of circulation on advertising demand. Editors choose first the political position, then simultaneously cover prices and advertising tariffs. We contribute to the literature on two-sided markets by endogenizing the political differentiation of newspapers in a model with more than two firms. We simulate changes to market structure in order to explore which of the candidate explanations is most likely to lie behind the observed price war.
Number of Pages in PDF File: 43working papers series
Date posted: November 12, 2009
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