
Abstract
The existing literature on "two-sided markets" addresses participation externalities, but so far it has neglected pecuniary externalities between competing platforms. In this paper we build a model that incorporates both externalities. In our setup differentiated platforms compete in advertising and offer consumers a service free of charge (such as a TV program) that is financed through advertising. We show that advertising can exhibit the properties of a strategic substitute or complement. Surprisingly, there exist cases in which platforms benefit from market entry. Moreover, we show that from a welfare point of view perfect competition is not always desirable.
Item Type: | Paper |
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Keywords: | two-sided markets, broadcasting, advertising, market entry, digital television |
Faculties: | Economics Economics > Munich Discussion Papers in Economics Economics > Munich Discussion Papers in Economics > Industrial Organization Economics > Chairs > Seminar for Comparative Economics |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
JEL Classification: | D43, L13, L82 |
URN: | urn:nbn:de:bvb:19-epub-963-6 |
Language: | English |
Item ID: | 963 |
Date Deposited: | 25. Jun 2006 |
Last Modified: | 08. Nov 2020, 11:11 |