DP12214 Media See-saws: Winners and Losers in Platform Markets

Author(s): Simon P Anderson, Martin Peitz
Publication Date: August 2017
Keyword(s): advertising, Aggregative games, Entry, Media economics, mergers
JEL(s): D43, L13
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12214

We customize the aggregative game approach to oligopoly to study media platforms which may differ by popularity. Advertiser, platform, and consumer surplus are tied together by a simple summary statistic. When media are ad-financed and ads are a nuisance to consumers we establish see-saws between consumers and advertisers. Entry increases consumer surplus, but decreases advertiser surplus if industry platform profits decrease with entry. Merger decreases consumer surplus, but advertiser surplus tends to increase. By contrast, when platforms use two-sided pricing or consumers like advertising, advertiser and consumer interests are often aligned.