Poaching in media: Harm to subscribers?

Transcription

1 Poaching in media: Harm to subscribers? Elias Carroni Dipartimento di Scienze Economiche Alma, Universita di Bologna Published in Journal of Economics & Management Strategy, November Yunhyoung Kim

2 Introduction Model Equilibrium Analysis Conclusion Table of Contents

3 Introduction Purpose of the paper Analysis on Two-sided Market + Behavior-based Price Discrimination Loyal Subscriber Advertiser Platform 0 Platform 1 Subscriber Media Firm High Price Low Price New Subscriber Media Firms Profit Advertisers Choice & Aggregate profits Subscribers Surplus

4 Introduction Approach Two-period Model + Comparison with uniform pricing

5 Introduction Effects on Advertisement Advertisers choose where to advertise : Multi-homing, Single-homing, X P0 Subscriber Advertiser Platform 0 P1 Subscriber Platform 1 Platforms choose advertising intensity (=advertising fee) Platform i Number of Ads.

6 Introduction Spoiler P1 Subscriber Advertiser Platform 1 P2 Subscriber Platform 2 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.

7 Subscriber Heterogeneous on Model Agents and Their Utilities : Transportation cost : Nuisance cost : AD intensity 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 α x (number of the exposed) (Ad Fee) Heterogeneous on α, with cdf Platform i Heterogeneous on : Number of subscribers : Advertisement fee

8 Model Sequence Period 1 Platform 0 Advertiser Platform 0 Platform 1 Subscriber Platform 1 Platforms decide Ads intensity Advertiser choose where to advertise Platforms choose subscription prices Platform 0 Period 2 P0 Subscriber Platform 1 Platforms choose subscription prices (discriminated) P1 Subscriber

9 Equilibrium Analysis Platforms Uniform Subscription Price Price is lowered as much as per-user advertising revenue

10 1. Second Period Equilibrium Analysis Platforms Behavior-based Price Discrimination Platform 0 p 00 p 01 x 1 = Indifferent subscriber s position at the first period P0 Subscriber P1 Subscriber Subscribers remain loyal x 1 Subscribers remain loyal 0 1 Subscribers churn to the other

11 1. First Period Equilibrium Analysis Platforms Behavior-based Price Discrimination Subscriber Subscribers know the price he/she will pay in period 2 Utility of a subscriber who first subscribes to platform j, and next subscribes to platform i : U ji (x) = U j (x) + δ U 2 ij (x) U 10 (x 1 )= U 01 (x 1 ) ; x 1 is the position of an indifferent subscriber between platform 0 and 1

12 Equilibrium Analysis Platforms Behavior-based Price Discrimination Advertising Intensity Subscribers remain loyal x 1 Subscribers remain loyal 0 1 Subscribers churn to the other

13 Equilibrium Analysis Platforms : Comparison of Profits Uniform Price Behavior-based Discriminated Price Subscriber s Information Fiercer competition between platforms (in 2 nd period) (same as the one-sided market literature of BBPD)

14 Equilibrium Analysis Advertiser Uniform Subscription Price An advertiser with quality α enter a platform if α x (number of the exposed) (Ad Fee) > 0 Advertiser Heterogeneous on α, with cdf An advertiser with quality α multi-homes or do not enter at all Overall demand for advertising is If the platform sells advertisements, it can sell the whole. In a symmetric equilibrium, s u i = N/2

15 Equilibrium Analysis Advertiser Behavior-based Price Discrimination Multi-homing advertiser : Single-homing advertiser :

16 Equilibrium Analysis Advertiser : total surplus of advertisers Assumption on : uniform distribution Uniform Price No ads if β > 1/2 Behavior-based Discriminated Price No ads if β > 1/3

17 Equilibrium Analysis Subscriber : total surplus Uniform Price Behavior-based Discriminated Price

18 Equilibrium Analysis Subscriber : total surplus Transportation cost BBPD is better Nuisance cost BBPD is better

19 Conclusion Contribution Definition - 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.