DP13022 The importance of consumer multi-homing (joint purchases) for market performance: mergers and entry in media markets

Author(s): Simon P Anderson, Øystein Foros, Hans Jarle Kind
Publication Date: June 2018
Keyword(s): circle model, equilibrium product variety, media platforms, multi-homing, two-sided markets
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13022

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.