Either or Both Competition: A “Two-sided" Theory of Advertising with Overlapping Viewerships

Date: 2014-10-18
By: Attila Ambrus (Duke University)
Emilio Calvano (CSEF, Università di Napoli Federico II)
Markus Reisinger (Otto Beisheim School of Management)
URL: http://d.repec.org/n?u=RePEc:sef:csefwp:378&r=net
In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for studying competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effect of strategic interaction on advertising levels, and the impact of entry and mergers. We show that novel forces come into play, which reflect the outlets’ incentives to control the composition of the customer base in addition to its size. We link consumer preferences and advertising technologies to market outcomes. The model can explain a number of empirical regularities that are difficult to reconcile with existing models.
Keywords: Media Competition, Two-Sided Markets, Multi-Homing, Viewer Composition, Viewer, Preference Correlation
JEL: D43 L13 L82 M37