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Discussion Paper Details

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Title: The importance of consumer multi-homing (joint purchases) for market performance: mergers and entry in media markets

Author(s): Simon P Anderson, �ystein Foros and Hans Jarle Kind

Publication Date: June 2018

Keyword(s): circle model, equilibrium product variety, media platforms, multi-homing and two-sided markets

Programme Area(s): Industrial Organization

Abstract: Consumer "multi-homing" (watching two TV channels, or buying two news magazines) has surprisingly important effects on market equilibrium and performance in (two-sided) media markets. We show this by introducing consumer multi-homing and advertising-finance into the classic circle model of product differentiation. When consumers multi-home (attend more than one platform), media platforms can charge only incremental-value prices to advertisers. Entry or merger leaves consumer prices unchanged under consumer multi-homing, but leaves advertiser prices unchanged under single-homing: multi-homing flips the side of the market on which platforms compete. In contrast to standard circle results, equilibrium product variety can be insufficient under multi-homing.

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Bibliographic Reference

Anderson, S, Foros, � and Kind, H. 2018. 'The importance of consumer multi-homing (joint purchases) for market performance: mergers and entry in media markets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13022