Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2007/5: Newspapers and Advertising: The Effects of Ad-Valorem Taxation under Duopoly

Hans Jarle Kind (), Guttorm Schjelderup () and Frank Stähler ()
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
Guttorm Schjelderup: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Frank Stähler: Dept. of Economics, University of Otago, Postal: University of Otago, Dept. of Economics, PO Box 56, Dunedin, New Zealand

Abstract: Newspapers are two-sided platforms that sell their product both to readers and advertisers. Media firms in general, and newspapers in particular, are considered important providers of information, culture and language in most countries. Newspapers are therefore given preferential tax treatment. We show that lower ad valorem taxes lead newspapers to become more differentiated. Thereby the competitive pressure falls, possibly resulting in higher newspaper prices and reduced quality investments.

Keywords: Two-sided markets; ad-valorem taxes

JEL-codes: D40; D43; H21; H22; L13

19 pages, February 13, 2007

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