Hohaus, Konrad, and Thum posit two equal-sized communities, L and H, with just enough housing sites to accommodate the entire population. By contrast, when choosing content B, a platform gets less than one-third of the consumers. If both platforms have the same content, a fraction d12 of consumers multi-home. One way to tackle the problem is to consider sequential entry of foresighted outlets that accounts for both the locations of subsequent entrants and the possibility of deterring their entry. A difficulty with these comparisons is that, as pointed out by Gabszewicz et al. Gianmarco Ottaviano, Jacques-François Thisse, in Handbook of Regional and Urban Economics, 2004, Increasing returns vs. transport costs 2569, Starrett and the breakdown of the competitive price mechanism 2571, Where do firms locate: the home market effect 2576, A nonlinear model with fixed mark-ups: CES utility and iceberg transport costs 2580, A linear model with variable mark-ups: quadratic utility and linear transport costs 2583, CES utility and iceberg transport costs 2589, Quadratic utility and linear transport costs 2592, The bell-shaped curve of spatial development 2598, Øystein Foros, ... Lars Sørgard, in Handbook of Media Economics, 2015. They find that multi-homing on the consumer side reduces the competitive pressure in advertising levels. Livraison en Europe à 1 centime seulement ! We show that problems of nonexistence of equilibrium in the short-run price game are diminished. 167.99.239.113. Therefore, consumers whose preference is close to the content of one of the platforms do not mix, while those located at less extreme positions choose to mix the content. But once stock effects were introduced, even the direction of the impact of changing conditions on price and quantity could not be established in general. Oligopoly: Horizontal Product Differentiation. The existence of endpoints in the space of characteristics produces results which are qualitatively different from the ones of the circumference model. Second, the preference structure is, by definition, perfectly negatively correlated; that is, the consumer who has the strongest preference for the content of platform 1 has the weakest preference for the content of platform 2, and vice versa. Ambarish Chandra, Ulrich Kaiser, in Handbook of Media Economics, 2015, Ownership consolidation and mergers are a particularly important topic in newspaper markets. Advertisers compete in the product market and inform consumers about their products via advertising. For n even number of players, the following is a pure strategy Nash equilibrium to Hotelling’s game. The, in a spatial duopoly model. Put every voter on a line, from right to left; candidates move towards the center. We now explore these extra dimensions to performance. The vendors simultaneously select a position. There are two main types of collusion, cartels and price leadership. Cournot Competition describes an industry structure (i.e. Summary The bigger a firm is, the more efficient. Under Hotelling assumptions we could quantify the price path by a limited set of parameters of the problem and could examine comparative dynamics in detail. Therefore, a price cut leads only to business stealing but does not increase overall demand in the market. It is also possible to relate the strength of the business-sharing and the duplication effects to consumers’ preferences and the content provided by the platforms. 1. The housing market is both beneficial and harmful in models of federalism. For the single platform, all consumers are exclusive consumers. 55–64. The inclusion of the nuisance cost leads platforms to separate to avoid ruinous competition in the ad “price” paid by consumers, and so to endogenously induce mutually compatible high levels of ads. The duopolist shares business with its rival, and losing this shared business is less detrimental than losing exclusive consumers. (This is the median voter theorem.) They find that profits are decreasing in the transportation cost parameter τ. standard “workhorse oligopoly theory” (Shapiro 1989, p. 346). The platforms then face a classic sort of two-sided market trade-off that what is good for extracting revenue from advertisers (here “low” quality) is bad for delivering the viewers’ eyeballs. We can also use the spatial analysis of Section 2.2 to determine the equilibrium outcome for a mixed-finance system (ads and subscription prices to consumers). The entire population is defined as a continuum indexed from (0, 1), and half the population must choose to live in each community. (2010). model consumer demand as a differentiated products discrete-choice problem. As shown by d’Aspremont et al. They show that a reduction of supply by one platform may lead the other platform to expand its supply. Since platforms do not set advertising prices but negotiate with producers, minimal differentiation does not lead to zero advertising prices but increases the surplus in the negotiation.27. model on [O, 11 of Hotelling (1929) and the oligopoly circumference model of Salop (1979). For instance, access to a large customer base helps Internet platforms improve the efficiency of their advertising services. A multi-channel monopoly platform has no incentives to offer several identical channels. This service is more advanced with JavaScript available, Oligopoly Dynamics Hence, intense competition for consumers in the media market results in low advertising levels. One feature of such spatial models of localized competition54 is that there are multiple equilibria (for six or more outlets in the linear market case) when a fixed number of outlets choose locations simultaneously, and that different positions can earn different profits, so some locations are more profitable than others in equilibrium. The central platform (think Clear Channel radio, or Hollywood movies) competes in all local markets but a local platform (Welsh language radio, or Bollywood) is also present in each local market. 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