Inter-Firm Price Coordination in a Two-Sided Market
Hans Jarle Kind, Tore Nilssen, Lars Sørgard
Discussion Paper 16/2014, Department of Economics, Norwegian School of Economics, May 2014.
In many two-sided markets we observe that there is a common distributor on one side of the market. One example is the TV industry, where TV channels choose advertising prices to maximize own profit and typically delegate determination of viewer prices to independent distributors. We show that in such a market structure the stronger the competition between the TV channels, the greater will joint profits in the TV industry be. We also show that joint profits might be higher if the wholesale contract between each TV channel and the distributor consists of a simple fixed fee rather than a two-part tariff.