Media Competition Enhances New-Product Entry: On the Market for Fake Observations

Kjell Arne Brekke and Tore Nilssen

Elsevier

Elsevier

Published in:

Information Economics and Policy 2015 31 pp. 59-66.

DOI: 10.1016/j.infoecopol.2015.03.001

Abstract:

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.

Published Dec. 10, 2015 1:44 PM - Last modified Dec. 10, 2015 1:44 PM