Thursday, July 17, 2014
Hans Jarle Kind, Norwegian School of Economics & Business Administration (NHH); CESifo (Center for Economic Studies and Ifo Institute); Norwegian School of Economics (NHH) - Department of Economics, Tore Nilssen, University of Oslo - Department of Economics, Lars Sorgard , Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics discuss Inter-Firm Price Coordination in a Two-Sided Market.
ABSTRACT: In many two-sided markets we observe that there is a common distributor on one side of the market. One example is the TV industry, where TV channels choose advertising prices to maximize own pro t and typically delegate determination of viewer prices to independent distributors. We show that in such a market structure the stronger the competition between the TV channels, the greater will joint pro ts in the TV industry be. We also show that joint pro ts might be higher if the wholesale contract between each TV channel and the distributor consists of a simple fi xed fee rather than a two-part tariff.