Platform competition for advertisers and users in media markets

Markus Reisinger

International Journal of Industrial Organization, 2012, vol. 30, issue 2, 243-252

Abstract: This paper analyzes a two-sided market model in which platforms compete for advertisers and users. Platforms are differentiated from the users' perspective but are homogenous for advertisers. I show that, although there is Bertrand competition for advertisers, platforms obtain positive margins in the advertising market. In addition, platforms' profits can increase in the users' nuisance costs of advertising. As a general insight, I obtain that factors affecting competition in the user market in a well-known direction without externalities now have opposing effects due to competition in the advertiser market. The model can also explain why private TV platforms benefit if their public rivals are regulated to advertise less—a result at odds with models in which there is no competition for advertisers.

Keywords: Platform competition; Two-sided markets; Advertising; Indirect externalities (search for similar items in EconPapers)
JEL-codes: D43 L13 L82 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:30:y:2012:i:2:p:243-252

DOI: 10.1016/j.ijindorg.2011.10.002

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