Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or Both?

38 Pages Posted: 28 Jun 2010

See all articles by Simon P. Anderson

Simon P. Anderson

University of Virginia - Department of Economics

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science

Hans Jarle Kind

Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); Norwegian School of Economics (NHH) - Department of Economics

Date Written: June 24, 2010

Abstract

Equilibrium prices behave quite differently if consumers single-purchase (buy either Time Magazine or Newsweek) or if some consumers multi-purchase (buy both). Prices are strategic complements under single-purchase, and increase with magazine quality. In a multi-purchase regime prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with magazine quality due to overlapping content. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase. We determine when each regime holds, and present a detailed reaction function analysis which applies more generally to duopoly pricing.

Keywords: magazine competition, multi-purchase, incremental pricing, content competition

JEL Classification: L13

Suggested Citation

Anderson, Simon P. and Foros, Øystein and Kind, Hans Jarle, Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or Both? (June 24, 2010). CESifo Working Paper Series No. 3096, Available at SSRN: https://ssrn.com/abstract=1629685 or http://dx.doi.org/10.2139/ssrn.1629685

Simon P. Anderson

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3861 (Phone)
804-982-2904 (Fax)

Øystein Foros

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

Hans Jarle Kind (Contact Author)

Norwegian School of Economics & Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 583 890 (Phone)
+47 55 583 901 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

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