Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 16/2014: Inter-Firm Price Coordination in a Two-Sided Market.

Hans Jarle Kind (), Tore Nilssen () and Lars Sørgard ()
Additional contact information
Hans Jarle Kind: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Tore Nilssen: University of Oslo, Postal: University of Oslo, Oslo, Norway
Lars Sørgard: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: In many two-sided markets we observe that there is a common distributor on one side of the market. One example is the TV industry, where TV channels choose advertising prices to maximize own profi…t and typically delegate determination of viewer prices to independent distributors. We show that in such a market structure the stronger the competition between the TV channels, the greater will joint profits in the TV industry be. We also show that joint pro…ts might be higher if the wholesale contract between each TV channel and the distributor consists of a simple fixed fee rather than a two-part tariff.

Keywords: Vertical relations; advertising; media economics.

JEL-codes: L11; L82; M31; M37

19 pages, May 22, 2014

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