Media Competition Enhances New-Product Entry: On the Market for Fake Observations
Kjell Arne Brekke and Tore Nilssen
Information Economics and Policy 2015 31 pp. 59-66.
We show how increased competition in a media market may have implications for the competition between firms that are advertising in that medium. We apply a simple model of a product market with network externalities where firms buy advertising space in a media market and find that entry in the product market of a new and superior product is more likely, the more competitive the media market is. The paper is the first combining a study of media markets with a behavioral foundation of how advertising affects the demand for the advertised products.