Semi-Collusion in Media Markets

Abstract: This paper explores the effects that semi-collusion can have in media markets where firms compete for advertising as well as for readership/audience. Assuming that readers are indifferent towards advertising we show that in a differentiated duopoly where newspapers first collude over advertising levels and than compete in newspaper prices, semi-collusion always benefits readers, as copy prices are lower than under either competition or full collusion. In contrast, advertisers suffer from both semi-collusion and full collusion when compared to competition. Readers, however, may even be better off under full collusion when compared to competition.