Working Paper Series, Department of Economics, University of Mannheim 15-16
We customize the aggregative game approach to oligopoly to study asymmetric media markets. Advertiser, platform, and consumer surplus are tied together by a simple summary statistic. When media are ad-financed and ads are a nuisance to consumers we establish see-saws between consumers and advertisers. Entry of a lower-quality platform increases consumer surplus, but decreases advertiser surplus if industry platform profits decrease with entry. Merger decreases consumer surplus, but advertiser surplus increases when the profits of the higher-quality platform within the merger increase. By contrast, when platforms use two-sided pricing or consumers like advertising,advertiser and consumer interests are often aligned.
media economics mergers entry advertising aggregative games