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Price Discrimination in a Two-Sided Market: Theory and Evidence from the Newspaper Industry

Charles Angelucci, Julia Cagé () and Romain de Nijs ()
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Romain de Nijs: Paris School of Economics

No 13-13, Working Papers from NET Institute

Abstract: We investigate theoretically and empirically the determinants of second-degree price discrimination in two-sided markets. We build a model in which a newspaper must attract both readers and advertisers. Readers are uncertain as to their future benefit from reading, and heterogeneous in their taste for reading. Advertisers are heterogeneous in their outside option, taste for subscribers, and taste for occasional buyers. To estimate empirically the effect of the advertisers' side of the industry on price discrimination on the readers' side, we use a "quasi-natural experiment". We exploit the introduction of advertisement on French Television in 1968, which we treat as a negative shock on advertisement revenues of daily national newspapers (treated group), but not on daily local newspapers (control group). We build a new dataset on French local newspapers between 1960 and 1974 and perform a Differences-in-Differences analysis. We find robust evidence of increased price discrimination as a result of a drop in advertisement revenues.

Keywords: Newspaper Industry; Second-Degree Price Discrimination; Two-Sided Markets (search for similar items in EconPapers)
JEL-codes: L11 M13 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-09
New Economics Papers: this item is included in nep-com, nep-cul, nep-ind, nep-mkt and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

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