London Newspaper S Price War

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Print newspaper demand in the 1990s in London became a war between the four biggest newspaper firms, this war involved the p]iFrom an economic position, the interrelationship of the sub-markets is a salient characteristic of mass media. Even though this interrelationship is not an exclusive characteristic of media markets, they are surely an important example for this phenomenon. The deciding feature of interrelated markets is the interdependency of the respective demands. An increment of the demand for, say, newspapers also results in an increasing demand for advertising. In contrast to standard complementary products, the reverse relation is not unconditionally symmetric. For example, if the readers’ valuation for advertising is negative (see Blair and Romano 1993) there are asymmetric relations. Thus, products offered by a media firm are neither pure substitutes nor complements. Moreover, and at least as important as the asymmetries, the consumers of the two products are not identical. Therefore, interrelated markets can be described as a peculiar phenomenon, which is not comparable with typical product market relations.

As mentioned above, media firms that publish newspapers or magazines have to consider two markets, the markets for the medium itself (primary market) and the market for advertising (secondary market). Since supplements in print media also generate additional costs and require additional prices, a differentiated consideration of advertisements and supplements would probably be appropriate. Therefore, at least two or three different prices have to be considered by the 2

publisher, neglecting price and product differentiation. Moreover, a number of additional parameters are subject of the optimisation process as, for example, the quality of editorial contents and advertising.

Similar market relations as for print media can be found with Internet portals. The Internet provider has to optimise access fees on the one hand and advertising rates...
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