Poaching in media: Harm to subscribers?

Elias Carroni

Journal of Economics & Management Strategy, 2018, vol. 27, issue 2, 221-236

Abstract: Two media platforms compete for heterogeneous users bothered by commercials and sell advertising spaces to firms. In a two‐period model, media are allowed to condition subscription prices on the past behavior of users. Within‐group price discrimination intensifies media competition on the firms' side, as some firms advertise only on one media outlet (single‐home), where they can meet early users and switchers. As a consequence, advertising revenues are reduced and this puts an upward pressure on subscription prices. However, price discrimination also induces stronger within‐group competition to poach the rival's users. Depending on the balance between these two forces, conditioning subscription prices on past behavior might be beneficial or detrimental to users, whereas it is always detrimental to platforms. In relation to within‐group uniform pricing, total welfare might increase or decrease, as the lower advertising intensity may entail either underprovision or a mitigation of overprovision of advertisements.

Date: 2018
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