Estimating market power in a two-sided market: The case of newspapers

ne newspaper industry is a two-sided market: the readers market and the advertising market are closely linked by inter-market network externalities. We estimate market power in the Italian newspaper industry by building a structural model which encompasses a demand estimation for differentiated products on both sides of the market and where profit maximization by the publishing firms takes into account the interaction between them. The question that we address is whether the observed price pattern is consistent with profit-maximizing behaviour by competing firms or is instead driven by some form of (tacit or explicit) coordinated practice. Copyright (c) 2007 John Wiley & Sons, Ltd.