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Competition between Content Distributors in Two-Sided MarketsHarald Berghaffiliation not provided to SSRN Hans Jarle KindNorwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Norwegian School of Economics (NHH) - Department of Economics Bjorn-Atle RemeNorwegian School of Economics (NHH) Lars SorgardNorwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics July 19, 2012 CESifo Working Paper Series No. 3885 Abstract: We analyze strategic interactions between two competing distributors of an independent TV channel. Consistent with most of the relevant markets, we assume that the distributors set end-user prices while the TV channel sets advertising prices. Within this framework we show that the distributors have incentives to internalize the fact that viewers dislike ads on TV, but no incentives to internalize how the TV-channel’s profits from the advertising market are affected by end-user prices. This leads to some surprising results. First, we show that even undifferentiated distributors might make positive profits. Second, a TV channel might find it optimal to commit to not raising advertising revenue. Third, regulation of the advertising volume might be welfare improving even if the unregulated advertising level is too low from a social point of view.
Number of Pages in PDF File: 31 Keywords: two-sided market, coordination, regulation, TV industry JEL Classification: L100 working papers seriesDate posted: July 20, 2012Suggested CitationContact Information
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