Competition between Content Distributors in Two-Sided Markets
affiliation not provided to SSRN
Hans Jarle Kind
Norwegian 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
Norwegian School of Economics (NHH)
Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics
July 19, 2012
CESifo Working Paper Series No. 3885
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: L100working papers series
Date posted: July 20, 2012
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