Valuing New Goods in a Model with Complementarity: Online Newspapers

Matthew Aaron Gentzkow ()

American Economic Review, 2007, vol. 97, issue 3, pages 713-744

Abstract: Many important economic questions hinge on the extent to which new goods either crowd out or complement consumption of existing products. Recent methods for studying new goods rule out complementarity by assumption, so their applicability to these questions has been limited. I develop a new model that relaxes this restriction, and use it to study competition between print and online newspapers. Using new micro data from Washington, DC, I estimate the relationship between the print and online papers in demand, the welfare impact of the online paper's introduction, and the expected impact of charging positive online prices. (JEL C25, L11, L82)

Date: 2007
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