Scale Economics, Market Power, and Pricing Behavior Evidence from German Newspaper and Magazine Publishing

Erik Lehmann and Jürgen Weigand ()
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Jürgen Weigand: University of Rostock

No 14, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics, Germany

Abstract: The anomalous inverse concentration-price relationship observed by some researchers in the newspaper market has been attributed to scale economies. In this paper we suggest that the newspaper's (or magazine's) "double-product" feature (i.e., news supplied to readers and advertising space supplied to advertisers) is the main source of this anomaly. In a simple oligopoly model it is shown how a profit-maximizing publisher takes advantage of that feature. Empirically an inverse concentration-price relationship may arise if double-product pricing is not controlled for. Regression results for a cross-section of 222 German Newspapers and magazines corroborate the theoretical implications.

Keywords: Scale Economics; Advertising; Concentration; Pricing Behavior (search for similar items in EconPapers)
JEL-codes: D4 L13 L82 (search for similar items in EconPapers)
Date: 1998
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