The Role of Online Platforms for Media Markets – Two‐Dimensional Spatial Competition in a Two‐Sided Market
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BORIS DOI
Date of Publication
May 31, 2013
Publication Type
Article
Division/Institute
Author
Subject(s)
Series
International Journal of Industrial Organization
ISSN or ISBN (if monograph)
0167-7187
Publisher
Elsevier
Publisher DOI
Description
We analyze the market for online and offline media in a model of two-dimensional spatial competition where
media outlets sell content and advertising space. Consumer preferences are distributed along the style and
type of news coverage where the distance costs may vary across dimensions. For integrated provision of online
and offline platforms we show that entering the online market reduces average profits and may even
constitute a prisoner's dilemma. Specialized provision may yield polarization in the style and type dimensions.
This is in contrast to the maximum–minimum differentiation result previously established in the literature
on multidimensional horizontal competition. We show that maximal differentiation in both dimensions
occurs due to the discrete nature of the type dimension and asymmetric advertising markets.
media outlets sell content and advertising space. Consumer preferences are distributed along the style and
type of news coverage where the distance costs may vary across dimensions. For integrated provision of online
and offline platforms we show that entering the online market reduces average profits and may even
constitute a prisoner's dilemma. Specialized provision may yield polarization in the style and type dimensions.
This is in contrast to the maximum–minimum differentiation result previously established in the literature
on multidimensional horizontal competition. We show that maximal differentiation in both dimensions
occurs due to the discrete nature of the type dimension and asymmetric advertising markets.