Prices and Network Effects in Two-Sided Markets: The Belgian Newspaper Industry

36 Pages Posted: 14 May 2009 Last revised: 29 May 2009

Patrick J. G. Van Cayseele

KU Leuven - Department of Economics

Stijn Vanormelingen

Hogeschool-Universiteit Brussel (HUBrussel); KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Date Written: February 26, 2009

Abstract

This paper investigates the two-sided nature of the newspaper industry. We explicitly take into account cross network effects that exist between advertisers and newspaper readers. On one side, advertisers' demand for publicity space depends on the number of newspaper readers and their characteristics. On the other side, readers' demand can be, positively or negatively, influenced by the number of advertisements. In addition, editors may own several newspapers and hence a variety of cross-market effects that result from changes in market prices exist. To estimate demand parameters for both sides of the market, a specific structural model is needed that takes into account those effects. We estimate network effects and price elasticities for Belgian newspaper publishers to assess market power and the degree of competition in the market, which experienced a large consolidation wave over the last decades. This allows us to evaluate a recent merger in the Belgian newspaper industry.

Keywords: two-sided markets, newspapers, demand estimation

JEL Classification: L11, L82, C23

Suggested Citation

Van Cayseele, Patrick J. G. and Vanormelingen, Stijn, Prices and Network Effects in Two-Sided Markets: The Belgian Newspaper Industry (February 26, 2009). Available at SSRN: https://ssrn.com/abstract=1404392 or http://dx.doi.org/10.2139/ssrn.1404392

Patrick G. J. Van Cayseele

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium
+32-16-326830 (Phone)
+32-16-326796 (Fax)

Stijn Vanormelingen (Contact Author)

Hogeschool-Universiteit Brussel (HUBrussel) ( email )

Stormstraat 2
Brussels, 1000
Belgium

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

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