Attitudes toward Advertising and Price Competition in the Press Industry

We consider a situation of duopolistic competition in the press industry, involving two editors competing in both the newspapers’ and advertising markets. The population of readers in this market is differentiated in terms of their attitudes toward advertising; some of them are assumed to be advertising-lovers, while the remaining ones are assumed to be advertisingaverse. We analyse a two-period sequential game whose players are the editors each selling a magazine of different political content. The editors also sell some proportion of their newspaper’s surface as advertising support for the products sold by the advertisers. In the first stage of the game, editors select the newsstand price of their magazine and, in the second stage, the advertising tariff they oppose to the advertisers. We identify the equilibrium of this sequential game and examine how it depends on the proportion of ad-lovers and ad-avoiders’ readers and on the intensity of their attraction-repulsion feelings for advertising. CORE, Université catholique de Louvain LEQAM, Université d’Aix-Marseille II Université de Paris II and LEI-CREST, Paris