Poaching in media: Harm to...
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Poaching in media: Harm to subscribers? Elias Carroni Dipartimento di Scienze Economiche Alma, Universita di Bologna Published in Journal of Economics & Management Strategy, November 2017 2018.01.09 Yunhyoung Kim
Transcript of Poaching in media: Harm to...
Poaching in media: Harm to subscribers?
Elias Carroni
Dipartimento di Scienze Economiche Alma, Universita di Bologna
Published in Journal of Economics & Management Strategy, November 2017
2018.01.09
Yunhyoung Kim
Table of Contents
• Introduction
• Model
• Equilibrium Analysis
• Conclusion
Introduction
Purpose of the paper
Media Firms’ Profit
Analysis on“Two-sided Market + Behavior-based Price Discrimination”
Advertiser SubscriberPlatform 0
Platform 1
Loyal Subscriber
New SubscriberMedia Firm
High Price
Low Price
Advertisers’ Choice &Aggregate profits
Subscribers’ Surplus
Introduction
Approach
Two-period Model + Comparison with uniform pricing
Introduction
Effects on Advertisement
Advertisers choose where to advertise : Multi-homing, Single-homing, X
Advertiser
P0 Subscriber
Platform 0
Platform 1
P1 Subscriber
Platforms choose advertising intensity (=advertising fee)
Platform i
Number of Ads.
Introduction
Spoiler
1. Platforms worse off under price discrimination.
2. Advertisers are better off under price discrimination, if the nuisance cost to ADs is low.
3. Subscriber surplus is higher under price discrimination,if the transportation cost is high.
Advertiser
P1 Subscriber
Platform 1
Platform 2
P2 Subscriber
Model
Agents and Their Utilities
Subscriber
: Transportation cost: Nuisance cost: AD intensity
Heterogeneous on
Advertiser
From “Anderson and Coate(2005)” and “Peitz and Valletti(2008)”Each advertiser sells a quality-α product at a price α
Each advertiser monopolizes the market Each subscriber exposed to the ad will buy the product
Heterogeneous on α ∈ , with cdf
α x (number of the exposed) – (Ad Fee)
Platform i
: Number of subscribers: Advertisement feeHeterogeneous on
Model
Sequence
SubscriberPlatform 0
Platform 1
Platform 0
Platform 1
P0 Subscriber
P1 Subscriber
Platform 0
Platform 1
Advertiser
Platforms decideAds intensity
Advertiser choosewhere to advertise
Platforms choosesubscription prices
Platforms choosesubscription prices
(discriminated)
Period 1
Period 2
Equilibrium Analysis
Platforms – Uniform Subscription Price
Price is lowered as much as per-user advertising revenue
Equilibrium Analysis
Platforms – Behavior-based Price Discrimination
1. Second Period
P0 Subscriber P1 Subscriber
Platform 0
p00 p01
0 1
x1 = Indifferent subscriber’s position at the first period
x1Subscribers remain loyal Subscribers remain loyal
Subscribers churn to the other
Equilibrium Analysis
Platforms – Behavior-based Price Discrimination
1. First Period
Utility of a subscriber who first subscribes to platform j, and next subscribes to platform i :
Uji(x) = Uj(x) + δ·U2ij(x)
U10(x1)= U01(x1) ; x1 is the position of an indifferent subscriber between platform 0 and 1
Subscriber
Subscribers know the price he/she will pay in period 2
Equilibrium Analysis
Platforms – Behavior-based Price Discrimination
Advertising Intensity
0 1
x1Subscribers remain loyal Subscribers remain loyal
Subscribers churn to the other
Equilibrium Analysis
Platforms : Comparison of Profits
Uniform Price
Behavior-based Discriminated Price
Subscriber’s Information Fiercer competition between platforms (in 2nd period)(same as the one-sided market literature of BBPD)
Equilibrium Analysis
Advertiser – Uniform Subscription Price
An advertiser with quality α enter a platform if α x (number of the exposed) – (Ad Fee) > 0
Overall demand for advertising is
If the platform sells advertisements, it can sell the whole.
In a symmetric equilibrium, sui = N/2
Heterogeneous on α ∈ , with cdf
Advertiser
An advertiser with quality α multi-homes or do not enter at all
Equilibrium Analysis
Advertiser – Behavior-based Price Discrimination
Multi-homing advertiser :
Single-homing advertiser :
Equilibrium Analysis
Advertiser : total surplus of advertisers
Uniform Price
Behavior-based Discriminated Price
No ads if β > 1/2
No ads if β > 1/3
Assumption on : uniform distribution
Equilibrium Analysis
Subscriber : total surplus
Uniform Price
Behavior-based Discriminated Price
Equilibrium Analysis
Subscriber : total surplus
Transportation cost ↑ BBPD is betterNuisance cost ↑ BBPD is better
Conclusion
Definition
Contribution
- Analyze the two-sided market model with BBPD
Main Results
- Platforms are worse off under BBPD.- Advertisers are better off under BBPD if the nuisance cost to ADs is low.- Subscriber surplus is higher under BBPD either if the transportation cost is high or if the nuisance cost to Ads is high.
