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Multisided Platforms and Market Power Some empirical evidence

2nd Lear Conference on the Economics of Competition Law Rome, June 7-8, 2007. Multisided Platforms and Market Power Some empirical evidence. Marc Ivaldi. Content. Printed media industries Market delineation Standard approach Model-based approach.

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Multisided Platforms and Market Power Some empirical evidence

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  1. 2nd Lear Conference on the Economics of Competition Law Rome, June 7-8, 2007 Multisided Platforms and Market PowerSome empirical evidence Marc Ivaldi

  2. Content • Printed media industries • Market delineation • Standard approach • Model-based approach

  3. Market definition in printed media industries • Distinctive features • Differentiated products • Content (general vs specialized information) • Quality (tabloids vs art magazines) • Frequency • Scope • Local vs national • Bidimensional products • Readership • Advertising • Substitutes • Other medias

  4. Market definition in printed media industries • Examples • Differentiated products • Recoletos / Unedisa case • Dialy and non dialy publications • General information, sport and financial papers • Tabloids and quality press • Gruner+Jahr / Financial Times / JV • Ballarino / Grandi quotidiani • Local and national publication (separate markets) • Conclusion • Demand side perspective • Printed media markets segmented in tiny sub-markets

  5. Market definition in printed media industries • Examples • Substitutability • Recoletos / Unedisa case • Newsquest Ltd / Independent News • Conclusion : Not taken into account • Written press distinct from other media products • Why? Not the same depth and range of information • However supply side arguments

  6. Market definition in printed media industries • Examples • Advertising • Newspaper publishing decision • Class Editori / Sole 24 Ore case • Recoletos / Unedisa • Conclusion • Different types of advertising define different types of readers and vice-versa • Readership and advertising are separate markets

  7. Market definition in printed media industries • Methods • Usually qualitative • Now quantitative • Archant Limited / Independent News and Media Limited • Commission claims to have performed a SSNIP test • Commission concludes that the relevant market is th local one

  8. An econometric illustration • Merger SOCPRESSE / Groupe Express-Expansion • French weekly magazines of general information • Decision : the merger has been authorized

  9. An econometric illustration • Econometric analysis by the competition authority • Individual demand are price inelastic • Aggregate demand is elastic • Conclusion • Cross-price elasticities are small • The market is larger??

  10. An econometric illustration Share of Unit Purchases in Total Sales (Average – 1996-2001)

  11. Outside good Subscription Unit purchase Titles Titles … … An econometric illustration

  12. An econometric illustration • Alternative model • Accounts for differentiation Relative market shares Differentiation effect Quality-Price tradeoff

  13. An econometric illustration • Alternative model • Accounts for differentiation • Accounts for endogeneity • First set of instruments : All exogenous variables + previous’ year circulation • Second set of instruments : All exogenous variables + advertising revenue and its lagged value

  14. Econometric illustration …. • …. of neglecting feedback effects between the two sides of the market • This can translate in bad estimates of market power …

  15. Example: The market for academic journals • Academic journals = intermediary role • Research output dissemination • Cerification • Academic journal = Two-sided structure

  16. Structure AUTHORS 0 € PUBLISHERS ARCHIVE K € LIBRARIES 0 € READERS

  17. Academic journals • A model • Main result: not recognizing the endogeneity of the impact factor yields zero correlation between the impact factor and the demand for journals !! Impact factor

  18. Acadamic journals: main result

  19. More general models • Argentesi – Filistrucchi (2006) • Kaiser – Wright (2006) • Rysman (2004)

  20. More general models • Argentesi – Filistrucchi (2006) • Collusion on readership / Competition on advertisng

  21. Concluding remarks • Market delineation under structural econometric provides a very differnt view of relevant markets • Needs more work • « Real » interaction effects • Dynamics • Sensitivity analysis • Mark Rysman

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