Working Paper: CEPR ID: DP13022
Authors: Simon P. Anderson; Ystein Foros; Hans Jarle Kind
Abstract: Consumer "multi-homing" (watching two TV channels, or buying two news magazines) has surprisingly important effects on market equilibrium and performance in (two-sided) media markets. We show this by introducing consumer multi-homing and advertising-finance into the classic circle model of product differentiation. When consumers multi-home (attend more than one platform), media platforms can charge only incremental-value prices to advertisers. Entry or merger leaves consumer prices unchanged under consumer multi-homing, but leaves advertiser prices unchanged under single-homing: multi-homing flips the side of the market on which platforms compete. In contrast to standard circle results, equilibrium product variety can be insufficient under multi-homing.
Keywords: Two-sided markets; Media platforms; Incremental-value prices; Merger; Single-homing; Media platforms; Circle model; Equilibrium product variety; Multihoming
JEL Codes: L13; L82; D43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| consumer multihoming (D16) | advertising pricing strategies (D49) |
| consumer multihoming (D16) | equilibrium consumer prices (P22) |
| merger (G34) | advertising pricing (M37) |
| platform entry strategies (L17) | proportion of multihoming consumers (D16) |