Pricing of Media Platforms with Vertical Differentiation

Lijun Pan ()
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Lijun Pan: Nagoya University

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2017, vol. 51, issue 1, 249-262

Abstract: Quality difference prevails among media firms featuring the two- sided property. This paper builds a two-sided duopoly model with vertical differentiation where consumers are heterogeneous in their preferences to high quality. We find that the media platform with high quality does not necessarily charge a higher subscription fee or advertising fee than the media platform with low quality in the presence of cross externalities between consumers and advertisers. In the consumer market, if the cross externality is sufficiently strong relative to the vertical differentiation in the consumer market and the horizontal differentiation on the advertising market, then the high-quality media firm charges a lower subscription fee than the low-quality media firm. In the advertising market, it is also possible for the high-quality firm to charge a lower subscription fee if the externality of consumers is weaker than the externality of advertisers.

Keywords: Media market; Vertical differentiation; Pricing; Two-sided platforms. (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 L82 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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