A Theory of Quality Competition in Newspaper Joint Operating Agreements
Economic Analysis Group US Department of Justice
Charles J. Romeo
U.S. Department of Justice - Economic Analysis Group
June 22, 2010
Newspaper Joint Operating Agreements (JOAs) are long term, inflexible contracts between metropolitan daily newspapers in the same market. These contracts maintain two editorial voices while combining all business operations of the two competitors in order to capture many of the scale economies that have put an end to newspaper competition in most markets. The question we address is what, if anything, drives newspapers to compete editorially once a JOA is formed? With contract terms that run in the 10s of years, one might reasonably question whether incentives exist to prod the partners to continue rigorous competition. Our study of JOA contracts indicates that the history of JOAs is filled with instances of unprogrammed renegotiations, and that how the partners fare in these negotiations appears to be driven by each party’s relative success in the market since the agreement was initiated. In essence, forming a JOA does not resolve the issue of which newspaper will remain in the marketplace once the JOA terminates. Editorial competition throughout the life of the JOA resolves this issue.
Keywords: Newspaper Joint Operating Agreements, Horizontal Contracts, Quality Competition
JEL Classification: L22, L43, L82
Date posted: June 23, 2010
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