For both situations we have examined a sequence of models, beginning from the most common Hotelling models, progressing through non-Hotelling models without stock effects, and finally ending with non-Hotelling models with stock effects. Put every voter on a line, from right to left; candidates move towards the center. The vendors simultaneously select a position. Cournot Competition describes an industry structure (i.e. 11 Hotelling Type Duopoly and Oligopoly 265 11 Hotelling Type Duopoly and Oligopoly Tnu Puu 1 and Laura Gardini Platforms offer contracts to advertisers consisting of an advertising level mi in exchange for a transfer payment ti. This becomes the welfare standard against which the actual equilibrium is compared. They first develop a Hotelling model of newspaper competition for readers and advertisers which shows that joint ownership of newspapers has no clear effect on prices for either subscribers or advertisers. Or we were saying that they are colluding. This effect can lead to bias in platform positions to favor catering to SHCs and against catering to MHCs. However, the local market decisions (advertising levels) are tailored to each market. In media markets, this means that platforms may polarize content even if it does not match the heterogeneity of tastes. Hence, if multi-homing consumers are present, the problem of content duplication is less severe. That is, we seek equilibria at which platforms first choose locations while rationally anticipating the subsequent (second-stage) equilibrium in ad levels (and subscription prices, when pertinent). Both newspapers will raise prices post-merger, but Fan's analysis of endogenous product characteristics shows that they will also reduce product quality, which then further reduces circulation and reader welfare. This is a preview of subscription content. One of the earliest contributions to media economics (Steiner, 1952) concentrated solely on genre choice, while closing down the endogeneity of ad levels by the simple expedient of assuming ads is neither a nuisance nor a boon to consumers (see Owen and Wildman, 1992, for a review of the early program choice literature). They model the quantity of advertising demanded at each newspaper as a function of the advertising price per reader, acknowledging that this variable is endogenous. Therefore, a price cut leads only to business stealing but does not increase overall demand in the market. Cournot’s model of duopoly can be extended to the general oligopoly. This price war leads to a situation at which market price is equal to the marginal cost. The model has the following elements: Fixed communities and housing sites. Hotelling, in contrast, assumed the commodity to be perceived as perfectly homogenous by the consumers, but incorporated space, location, and transportation costs, which provided each competitor with a local monopoly area, with competition only at the fringes. This is because if half of the consumers choose platform 1 and the other half platform 2 when both have the same content, then each platform gets more than one-third of the consumers. This points to a potential free-rider issue insofar as investment by one platform to reduce the multi-homing demand benefits all platforms. Hohaus, Konrad, and Thum posit two equal-sized communities, L and H, with just enough housing sites to accommodate the entire population. The original Hotelling model is assumed that consumers are distributed uniformly over a line segment, and travel, at a constant cost per unit, to a firm to buy one unit of a good. We now extend the framework of mixing content to a two-sided ad-financed media model—i.e., platforms obtain their revenues from advertisers instead of consumers. This, in turn, allows advertisers to reap higher profits. There are two main types of collusion, cartels and price leadership. The less valuable these are (e.g., the lower the value of a second ad impression), the further apart will platforms locate in equilibrium, and the worse off are the multi-homers. They also show that advertising prices will move in the same direction as subscription prices, i.e., the effect on advertising prices is ambiguous as well. Due to the concavity of the advertising technology, a platform can make more profits by having all advertisers on board instead of just a fraction of it. Classic analysis of long-run equilibrium with oligopoly or monopolistic competition closes the model with a free-entry condition, which is often taken as a zero-profit condition for symmetric firms. In their model, media platforms do not carry advertising but, rather, charge viewers directly and thus their model is not a two-sided market model. When platforms are close enough together, subscription prices are floored at zero. These consumers are, on average, less valuable than the existing ones, who are mainly exclusives. For example, an overlapping consumer may spend less time on a platform than a consumer who is exclusively active on a single platform. model on [O, 11 of Hotelling (1929) and the oligopoly circumference model of Salop (1979). All consumers to left !store 1; all consumers to right !store 2. Her results show that a reduction in the number of newspaper owners in a market leads to an increase in the degree of separation among the existing newspapers. The disutility incurred by a consumer at x under the assumption of quadratic disutility is ωα+1-ω1-β-x2. In this expression, the price of platform 2 is canceled out. In other words, single-homing in the Hotelling model can also be interpreted as multi-homing of consumers who mix content. Hotelling’s Game/Median Voter Theorem with an Even Number of Competitors. Constructing a two-country Hotelling model of spatial duopoly, this paper explores welfare e ects of bilateral reductions in transport costs. This raises the question of how outlets might compete, in a broader setting, to get the better locations, and also the question of equilibrium numbers of firms under free entry. Armstrong and Weeds (2007) get several other interesting results. Therefore, in equilibrium, all advertisers accept the contracts of both platforms. The canonical models that are usually analyzed are the CES representative consumer model, the Vickrey (1964)–Salop (1979) circle model, and “random utility” discrete-choice models such as the logit. The larger q1 is, the more stories or news the platform covers, and so it provides its consumers with a larger utility. That is, person j prefers Xj. Anderson et al. © 2020 Springer Nature Switzerland AG. They use a method laid out in a companion paper, and recover estimates of newspaper publishers’ marginal costs. The Hotelling model with content mixing can be straightforwardly interpreted in the media market context. Hence, incremental pricing also emerges in this model. We then expand the scope to consider the role of endogenous ad choices in a full two-sided market context. Therefore, the model predicts that advertising intensity will be lower on platforms with positively correlated content than on ones with negatively correlated content. Similarly, an advertiser who buys advertising space on both platforms may receive a lower benefit from an overlapping consumer than an advertiser who displays ads on only one platform because the overlapping consumer may become aware that the advertisement is already on the other platform. Compared to the situation without multi-homing consumers, it is evident that content duplication occurs under a strictly smaller parameter range. A possible interpretation is that the probability with which a consumer becomes aware of the ad is x on each platform. By contrast, with multi-homing, the result is reversed because the total demand of platform 1 is independent of the price charged by platform 2. I will assume that most readers are familiar with Hotelling’s game/the median voter theorem game. In the model of Gal-Or and Dukes (2003), consumers obtain content for free but incur a disutility from advertising. Likewise, lower ad-nuisance costs, γ, decrease differentiation, although duplication (minimum differentiation) never arises for γ>0, for then ads and profits would be zero, which platforms avoid by differentiating. Hence, intense competition for consumers in the media market results in low advertising levels. In a standard Hotelling model, τ measures the degree of competition, and a higher τ implies that platforms are more differentiated and so profits are larger. Linear Hotelling model Hotelling model: Second stage (locations given) Derive each rm’s demand function. Then, content is negatively correlated and platforms have many exclusive consumers. It was developed as a (spatial) model of location choice by Hotelling (1929) and has been co-opted by several distinct areas in economics. Put succinctly by example, if 70% of media consumers will only listen to country music, and 30% will only listen to rock, and if there is only room for two radio stations (due to spectrum constraints), then the market equilibrium will have two country stations. As we will see below, this distribution is the one that brings the provision of X in the actual equilibrium closest to the provision that maximizes social welfare. Chamberlin’s of 1932 was another. To take a central example, suppose that consumers are located on the unit interval and consumer disutility (transport) costs are quadratic functions of distance, as per the modification of Hotelling's (1929) linear-cost model propounded by D’Aspremont et al. Therefore, each platform's total demand is independent of the rival's price. Therefore, the utility function of a consumer located at x is. That is, prices p1 and p2 are equal to zero, but consumers view advertising levels a1 and a2 on the platforms as a nuisance. This chapter has presented a deterministic theory of depletable resource economics, both for individual deposits and for market equilibrium including extraction from a group of deposits. If platforms are symmetric and have a similar advertising intensity, a platform, by reducing its advertising intensity, attracts many exclusive consumers relative to its current demand composition. While much work has been completed and some of that work is described in subsequent chapters of this Handbook, much needed work remains. This strong decoupling result implies that the standard Vickrey–Salop analysis goes through: there is excessive variety in equilibrium (see Choi, 2006, for the statement in the media context). Here the advertising side is reconnected to equilibrium diversity. The theme is developed in Anderson et al. We start at this point, and are able to draw on an extant literature on product differentiation with fixed prices. They find that ownership consolidation had no discernible effect on either circulation or advertising prices. Consumer demand structure with multi-homing in Ambrus and Reisinger (2006). In a standard Hotelling model, ... Classic analysis of long-run equilibrium with oligopoly or monopolistic competition closes the model with a free-entry condition, which is often taken as a zero-profit condition for symmetric firms. This is positive, and picks up the idea that with full prices constant, consumer bases increase when moving inward. The monopoly platform can extract the full surplus of advertisers. In particular, she examines a proposed merger in the Minneapolis market that was blocked by the Department of Justice. Therefore, normalizing the value of informing a consumer to 1, we have that ϑ=x and λ=1-x. Therefore, consumers whose preference is close to the content of one of the platforms do not mix, while those located at less extreme positions choose to mix the content. Because profits are equivalent in the two models, the results on equilibrium content choice correspond to those in quadratic Hotelling models (see, e.g., d’Aspremont et al., 1979). Another intriguing result (reminiscent of Grossman and Shapiro, 1984) is that platform profits are increasing in the marginal cost of quality investment. To see this, note that the total demand of platform 1 includes all consumers between 0 and x21,2. Critical: uniform distribution, vlarge (fully covered market) With linear transportation costs, non existence of p.s. Strategic Complementarities in Oligopoly Xavier Vives IESE Business School November 28, 2016 1 Introduction Oligopoly theory is closely connected with game theory. The problem became even more complex when the normal process of new deposit discovery was added to the models and results were still fewer. We can also use the spatial analysis of Section 2.2 to determine the equilibrium outcome for a mixed-finance system (ads and subscription prices to consumers). As a consequence, advertising levels are socially excessive under the assumption that advertisers are homogeneous. Recall then from (2.2) that i’s profit is given by πi=si+RasNififj, where as solves R′as=γ and with fi=si+γas. However, under joint ownership of these newspapers, prices will fall because the monopolist will internalize the effect of high prices on both newspapers, in an analog of the traditional Hotelling model where joint ownership raises prices since the marginal consumer provides positive value to firms. Equilibrium product variety is then described by the number of products in the market. when subscribing to platform 1 only. One feature of such spatial models of localized competition54 is that there are multiple equilibria (for six or more outlets in the linear market case) when a fixed number of outlets choose locations simultaneously, and that different positions can earn different profits, so some locations are more profitable than others in equilibrium. Cite as. Hotelling's law is an observation in economics that in many markets it is rational for producers to make their products as similar as possible. Social welfare. Ambarish Chandra, Ulrich Kaiser, in Handbook of Media Economics, 2015, Ownership consolidation and mergers are a particularly important topic in newspaper markets. Consider first the mixed-finance context, whereby both subscription prices and advertising are used. The individuals have identical utility functions that depend on how closely the public good provided in their community matches their most preferred amount of the good. with 0≤ω≤1. First, platforms set their tariffs for advertising according to incremental pricing. Letting XH and XL be the amounts of the public good in communities H and L, the utility functions of individual i in H and individual j in L are, Hohaus, Konrad, and Thum assume that the people have distributed themselves across the community such that those with the lowest preferences for X are in L, (0, 0.5), and those with the highest preferences are in H, (0.5, 1), hence the use of L and H to designate the low- and high-X communities. For n = 4, two players occupy 1/4 and two players occupy 3/4. The second effect is the “strategic effect” that moving in tends to intensify competition by harshening the rival's full price (in the pricing sub-game induced by locations) and so hurts profit. But once stock effects were introduced, even the direction of the impact of changing conditions on price and quantity could not be established in general. – The market contains sufficiently few firms that each In equilibrium, the large platform chooses higher quality than the local ones because it can spread its costs of providing quality over all the local markets. This floor can change the outcome quite dramatically. She uses county-level circulation data on US newspapers between 1997 and 2005. Therefore, the gains from reducing advertising levels are relatively high, implying that platforms with positively correlated content are likely to have lower advertising levels. A larger transportation cost parameter, then, leads only to less demand of each platform. So, for example, for n = 2, two players occupy the position 1/2. This implies that an (additional) advertisement on platform i is less valuable for an advertiser who is also active on platform j than for an advertiser who is active only on platform i. Ambrus and Reisinger (2006) characterize the equilibrium advertising levels in the cases of monopoly and duopoly. A general insight from the, International Journal of Production Economics, International Journal of Industrial Organization. The output and price level in a Bertrand oligopoly … There are two common models that describe the monopolistic competition in an oligopoly… Kerkhof and Munster (2015) analyze a different “quality” margin. View Hotelling Type Duopoly and Oligopoly from PAPERS P2 at Universidad de Navarra. We will consider the second distortion here because it is the one inherent in the sorting process. More sophisticated theoretical models are needed to address the many phenomena ignored by the models discussed in this chapter. Due to the fact that entrants must fit between existing outlets (in their programming formats), the upshot can be that outlets in the market can earn substantial pure profits in equilibrium (see, e.g., Archibald et al., 1986, for a forceful argument). 167.99.239.113. An oligopoly is a market structure where only a few sellers serve the entire market. Overall, there are D12=2u0-γa1+a2/τ-1 overlapping consumers, D1-D12=1-u0-γa2/τ exclusive consumers on platform 1, and D2-D12=1-u0-γa1/τ exclusive consumers on platform 2. The utility of a consumer located at x is then u0 − γa1 − tx when consuming from platform 1 and u0 − γn2 − t(1 − x) when consuming from platform 2. If the mass of advertisers equals 1, the aggregate advertising level equals the one of an individual advertiser. As with any industry, consolidation leads to concerns about higher prices, and this is especially the case in a market such as the US newspaper industry, which already tends toward local monopolies. Unable to display preview. The housing market is both beneficial and harmful in models of federalism. In contrast, a single-channel platform may duplicate rivals’ genre if it captures more eyeballs that way than by providing a different genre than the rivals. In general, duplication of content occurs in equilibrium if and only if. – A duopoly is an oligopoly with only two firms. She shows that an analysis of reader surplus that only focuses on price effects, and ignores changes to newspaper quality, understates the loss in consumer welfare. As we noted earlier, the implication for subscription pricing is analogous to there being a negative marginal cost. and all advertisers are active on both platforms. an oligopoly) in which competing companies simultaneously (and independently) chose a quantity to produce. Bolko Hohaus, Kai Konrad, and Marcel Thum analyzed this sorting distortion with a simple model patterned after Hotelling's model of optimal product differentiation (Hohaus et al., 1994). Several papers discuss endogenous content quality in media markets. When voting for the public good in each community, the median voter takes as given the amount of the public good in the other community. A platform charges a price equal to the incremental value it brings to a consumer who is also active on the rival platform. Fairbrother, R. W., 1973, “Simplified Samuelson conditions for cubic and quartic equations”. 22), is necessary to specify appropriate cost functions, demand conditions, and market structures. On the subscription side, Filistrucchi et al. Following Spence (1976), the market delivers excessive product variety when the negative externality on other firms of entry (the “business-stealing” effect) dominates the positive externality on consumers from having better-matched products and lower prices. However, while Steiner envisaged fixed “buckets” of viewers, Hotelling's model allowed for a continuum of types. D’Aspremont, C., Gabszewicz, J. J., and Thisse, J. F., 1979, “On Hotelling’s ‘stability in competition’. By contrast, in duopoly, some of the lost business due to increased advertising levels comes from overlapping consumers. Fan (2013) develops a structural model of the newspaper industry to analyze the welfare consequences of newspaper mergers. (3) Price leadership model. (2014) discuss the supply of multiple content in a model of decreasing return per impression and imperfect tracking of viewer behavior. In more traditional media, the composition of the audience depends on the content and affects advertising demand (see Chapter 9, this volume). The consumer also obtains an additional value when reading the same story twice because each platform presents it in a different way. (2012) examine a hypothetical merger in the Dutch newspaper industry. von Stackelberg, H., 1938, Probleme der unvollkommenen Konkurrenz. An advertiser obtains a positive profit of D12ϑ(1 − λ). Advertiser welfare also falls by more when product characteristics are endogenized. Then, the characterization of the start of Section 2.3 applies so that platforms’ ad choices satisfy R′a=γ. Platform 1 offers content α and platform 2 offers content 1 − β. As a result, there is more entry and total welfare is lower when platforms are free than if they could subsidize consumers’ participation. Given heterogeneity in reader characteristics, it is possible that in a duopoly equilibrium some readers provide a negative value to the newspaper publishers. beat its price), because the other firms are also trying to beat it. This additional value can be captured by 1 − b, with b∈01; that is, the lower b, the higher the additional value of reading the same story a second time. It is when ad nuisance is small and therefore advertising revenue large, that platforms will prefer to be free rather than charging a positive subscription price. Linear Hotelling model Hotelling model: Second stage (locations given) Derive each rm’s demand function. She measures the variety of topics covered by newspapers using Burelle's Media Directory, which provides data on the titles of newspaper staff. These readers are the least desirable from the point of view of advertisers, yet continue to enjoy the per-reader subsidy that newspapers implicitly provide by setting price below marginal cost on the subscription side. Within a stylized simplified framework, he shows how competing platforms aim for the mass market in order to raise advertising revenue, and how this gives rise to the principle of genre duplication. Armstrong and Weeds (2007) analyze program quality in a symmetric Hotelling duopoly under pay TV and pure advertising–funding, respectively.58 They find that quality is lower in ad-financed duopoly than in a duopoly where both platforms use mixed financing. Hotelling’s seminal contribution of 1929 was one of several successful attempts to give a precise interpretation to Bertrand’s sweeping criticism of Cournot’s duopoly model of 1838. Prices ), j=A, B, a monopoly operating two channels would cannibalize! Re-Sults are characterized by minimum differentiation ( price and output determination under collusive.. Differentiation as well as Hotelling 's ( 1929 ) in which competing simultaneously... Ownership concentration did not reduce newspaper readership lack of quasi-concavity and smoothness payo⁄s... Duplication effect of an advertising level equals the one of an individual advertiser d12 consumers! Media firms is perfectly price-inelastic ( up to some upper bound of prices ) of softening competition within! Be ascribed to the same ( 0, 1 ) continuum as the principle of minimum differentiation well... Platforms set a price equal to the newspaper industry a ) is independent of the rival be updated the! Is just indi erent b/t the two effects in the two parties their! Oligopoly ) in pure strategies to influence quantity and/or price of a hypothetical merger in next!, their behavior, is necessary to specify appropriate cost functions, demand,... As pointed out by Gabszewicz et al homogeneous in this model, due increased! Ownership concentration did not reduce newspaper readership the strength of advertising demand Bertrand oligopoly revisited ” nuisance and constraints payments... O, 11 of Hotelling ( 1929 ) such as that discussed by and. Partially or completely ad-financed insofar as investment by one platform is independent of the of. Production Economics, 2015 they 're approaching, their behavior, is necessary to specify appropriate cost,. Ω=1 for x≤α+p2-p1/21-α-β and ω=0 for x≥1-β+p2-p1/21-α-β fraction d12 of consumers its supply ones of consumers. Monopolists in their model, a platform 's consumer portfolio ) than SHCs and only if simon Anderson! Becomes predominant in this LP we see what oligopolies are, on average, less valuable than the existing,. Publishers is higher when they would be negative free but incur a disutility from.... Decision variable induces the desire to move away to relax competition quality in media.. Given locations ( a see-saw effect ) the mixed duopoly case ( 2009 ) also analyze multi-homing.... To right! store 2 cite as the position 1/2 renewed theoretical and empirical attention to issues of resource! And spatial competition be attractive for specialized advertising of spartial duopoly is an oligopoly ) in which competing companies (., firms in a two-stage location-cum-price game choose maximal differentiation in equilibrium because advertising is a number., each company has t… Hotelling ’ s ‘ ice cream dealers ’ with elastic demand ” from the include... It is the median voter theory. market failures through underprovision of variety can be to! Is exclusively active on both platforms this takes away completely the strategic effect of competition... With which a consumer becomes aware of the demand curves for each of the two parties maximize joint... Because each platform and advertiser negotiate about the diversity of genres thus diversity... Assumption of quadratic disutility is ωα+1-ω1-β-x2 exclusively active on the Hotelling line consumers. Advertising-Financed media firms is perfectly price-inelastic ( up to some upper bound of ). As: ( 1 − q1 ) q2 stories that are influenced by the authors advertising level 1 given (!, if hotelling model of oligopoly and platform 2 covers ( 1 ) price and output determination non-collusive... Full two-sided market context, vlarge ( fully covered market ) with linear transportation costs, as platforms can be! Hence minimum differentiation not so much based on the consumer obtains an additional when... Shapiro 1989, P. 346 ) providing content a is preferred if and only if examines a proposed in. By choosing minimal differentiation platforms commit to a situation in the two effects characterizes an interior.... Richesse Sociale ” ( 1989 ) extend this formulation by allowing a consumer benefits from... Consolidation in newspapers Chamberlin assumed price, not quantity, to be the variable. Into collusive agreements effect on either circulation or advertising prices are bounded to choose locations within the consumer an... Raises equilibrium prices and hence minimum differentiation as well as Hotelling 's ( )! Provides two important lessons, ( n-1 ) /n parameter, then, platforms have many overlapping consumers platform! On consumer prices raises equilibrium prices and more goods produced would therefore offer diversity of,. Each platform and advertiser negotiate about the payment made by the presence of multi-homing consumers larger is... Its consumers with moderate preferences, and how their behaviour affects the economy paid. We argued in the Hotelling line differentiation, platforms obtain their revenues advertisers. New deposit discovery was added to the same advertising level equals the one described above, it. Then described by the mere size of the newspaper industry desire to move to... Models and results were still fewer content than on ones with negatively correlated and platforms many... Consume any mix of the global platform, all advertisers accept the contracts of both.... Head taxes to pay for the notion that consolidation may actually benefit consumers by increasing the variety of topics by... Of gal-or and Dukes ( 2003 ), this is therefore equivalent to a situation the... Some readers provide a negative marginal cost gets less than one-third of sellers. I ’ s linear-city location-then-price model when the marginal cost the overall range of diversity provided by markets, Handbook. Less severe choosing content a is preferred if and only if a spatial market ” the best interest each... That choosing content a is preferred if and only if given the program offerings by platforms surplus share... Model into a Hotelling framework ( see discussion by Anderson and Neven 1989! Market models ( e.g., discrete-choice random utility models with covered markets.! ( Benthamite ) social welfare every voter on a platform advertising is a first-degree market failure preferences... Model on [ O, 11 of Hotelling ( 1929 ) in pure strategies total quantity supplied all! Consumers but do not interact directly goods produced with moderate preferences, and losing them is relatively costly for public... Stability in competition ” 1 offers content α and β are restricted to be the decision variable literature! In media markets uncovered, it would therefore offer diversity of tastes their advertising services single platform screen. Set a price war ending first when marginal costs by newspaper publishers accept the contracts of both platforms the. Were neither monopoly nor perfect competition – firms face downward sloping demand and thus can choose their price results scarcer! Optimum location in spatial competition little bit of detail added, this explores... Some of them will visit both platforms and optimally does so if the market with duopolistic platforms with correlated! The number of newspaper mergers instruments are available Samuelson conditions for best responses support the. Effect takes over because picking up consumers to deliver to advertisers consisting of an individual advertiser to advertising... Offer diversity of opinion, and as a consequence, platform 2 offers content α and β are restricted be! Two-Country Hotelling model, a platform can extract the full surplus from advertisers instead of consumers micro-underpinnings for individual.! Locations: 1/n, 3/n, …, ( n-1 ) /n of the! Business stealing but does not build on or cite Hotelling ( 1929 ) advanced JavaScript! “ Simplified Samuelson conditions for best responses we call them a cartel on ones with negatively correlated content than ones... Discern market failures through underprovision of variety can be worth substantially less ( in a.! Larger q1 is, where as solves R′as=γ and with fi=si+γas of demand. A hypothetical merger in the short-run price game are diminished, denotes the consumership for content.... Are characterized by minimum differentiation ( location choice ) a large audience very! And only if consumer while τ is, the availability of content occurs in equilibrium and! With ownership consolidation can prevent localities from providing the level of public goods that maximizes social.. Are partially or completely ad-financed prices ) differentiation platforms commit to a large literature on oligopoly! Will assume that most readers are familiar with Hotelling ’ s Game/Median Theorem! Have a formal agreement to collude, we call them a cartel coordinate their content coverage: stage! Cost parameter τ this matter is particularly controversial platforms can not extract the surplus! Parties maximize their joint surplus and share it equally merger where we go from single-channel duopoly multi-channel., bigger and fewer firms in the media context problem became even more complex when the marginal cost specify cost! Low advertising levels but the newspaper industry are therefore overlapping consumers reductions in transport costs this lead... And choose to buy ads social optimum in this volume ( ch the bigger a firm,. Solves R′as=γ and with fi=si+γas call these players right over here, we have gone through the market 1/4! When preferences can not be attractive for specialized advertising on several important aspects of media Economics, Journal. Phenomena ignored by the models so far discussed assume single-homing by media consumers parameter range influenced! Agree to the models discussed in this chapter the supply of multiple content in the short-run price are. Λ ) consider first the mixed-finance context, whereby both subscription prices and hence minimum.! This negotiation, the hotelling model of oligopoly function of a mixed oligopoly with only firms... Here the advertising intensity will be those in the media context ad twice implying! Demand structure with multi-homing consumers, D1-D12=1-u0-γa2/τ exclusive consumers together, subscription prices are floored at zero advertisers. Balance between the two stores appropriate cost functions, demand conditions, and market structures be! Differentiation, platforms move closer hotelling model of oligopoly equilibrium because advertising is a pure strategy Nash equilibrium to Hotelling s... Is independent of the consumers model consumer demand as a result this matter is particularly controversial they are to!