Market shares in two-sided media industries

Abstract

This paper generalizes the frequently used Hotelling model for two-sided markets in order to determine the equilibrium market shares. We show that independent of whether consumers are uniformly or non-uniformly distributed, advertisement levels neither depend on the media price nor on the location of the media firm. An increase in advertising revenues does not change location but only the media price. However, we show that if the distribution is asymmetric, market shares will be asymmetric as well, and that the media firm with the larger market share has the higher media price. Thus, even in absence of any fixed costs, this firm makes a higher profit per reader and in aggregate than its smaller rival.