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on Marketing |
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Issue of 2013‒12‒06
four papers chosen by Joao Carlos Correia Leitao Universidade da Beira Interior and Universidade de Lisboa |
| By: | Alexei Parakhonyak (National Research University Higher School of Economics, Moscow, Russia.) |
| Abstract: | I study a model of oligopolistic competition in which consumers search for prices, but have no idea about the underlying price distribution. Consumers’ behaviour satisfies four consistency requirements such that beliefs about the underlying distribution maximize Shannon entropy. I derive the optimal stopping rule and equilibrium price distribution of the model. Unlike in Stahl (1989), the expected price is decreasing in the number of firms. Moreover, consumers can benefit from being uninformed, if the number of firms is sufficiently large. |
| Keywords: | consumer search, search without priors, bounded rationality, entropy |
| JEL: | D83 D43 L11 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:30/ec/2013&r=mkt |
| By: | Anna D'Annunzio (Universita' degli Studi di Roma "La Sapienza") |
| Abstract: | We study distribution and investment in content quality in a two-sided media market. We show that a content provider prefers to provide the premium content exclusively to a platform, no matter what the vertical structure of the industry is. However, a vertically integrated content provider has fewer incentives to invest in quality than an independent one. When downstream platforms are asymmetric, the platform with a competitive advantage on the advertising market gets the exclusive content and the content provider invests even less in quality when it is integrated with it. When we endogenize the vertical structure of the industry, we find that the content provider acquires the platform with a competitive advantage on the advertisers market. Vertical integration reduces both consumer surplus and total welfare. Our results suggest that, in merger control,authorities should carefully assess the effects of the integration on the incentives to invest in content quality. Moreover, a policy intervention at the distribution stage that enforces non-exclusive provision might have adverse effects on consumer surplus and welfare. Also advertising cap could have the effect of reducing quality. |
| Keywords: | exclusive contracts, premium content, investment, quality, media, twosided markets, vertical integration, merger, advertising cap |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:aeg:report:2013-16&r=mkt |
| By: | Rudiger, Jesper |
| Abstract: | A characteristic of the news market is that consumers often cross-check information, i.e. observe several news outlets. At the same time, data on political media suggest that more partisan consumers are more likely to cross-check. We explore these phenomena by building a model of horizontal competition in newspaper endorsements. Without cross-checking, outlets are unbiased and minimally differentiated. When cross-checking is allowed, we show that cross-checkers are indeed more partisan than those who only acquire one report. Furthermore, cross-checking induces outlets to differentiate, and the degree of differentiation is increasing in the dispersion of consumer beliefs. Differentiation is detrimental to consumer welfare, and a single monopoly outlet may provide higher consumer welfare than a competitive duopoly. |
| Keywords: | News Markets; Media Bias; Cross-checking; Hotelling |
| JEL: | D82 D83 L81 |
| Date: | 2013–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:51786&r=mkt |
| By: | Andrei Hagiu (Harvard Business School, Strategy Unit); Hanna Halaburda (Bank of Canada) |
| Abstract: | We study the effect of different levels of information on two-sided platform profits?under monopoly and competition. One side (developers) is always informed about all prices and therefore forms responsive expectations. In contrast, we allow the other side (users) to be uninformed about prices charged to developers and to hold passive expectations. We show that platforms with more market power (monopoly) prefer facing more informed users. In contrast, platforms with less market power (i.e., facing more intense competition) have the opposite preference: they derive higher profits when users are less informed. The main reason is that price information leads user expectations to be more responsive and therefore amplifies the effect of price reductions. Platforms with more market power benefit because this leads to demand increases, which they are able to capture fully. Competing platforms are affected negatively because more information intensifies price competition. |
| Keywords: | two-sided platforms, information, responsive expectations, passive expectations, wary expectations |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:12-045&r=mkt |