Essays on industrial organisation
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This dissertation examines the implications of changes in technology and government regulations for the prices consumers pay and the volumes they consume in two important markets: the market for news and the market for alcohol. Digital technology has transformed the newspaper market, a market where preferential tax treatment of printed newspapers has been widespread although this has not always been extended to digital newspapers. Given the fundamental similarity of content between digital and printed newspapers this digital divide is under pressure. But, what are the implications of lowering the tax rate on digital news? Will it lead to lower prices and more consumption? In a model which allows consumers to buy more than one source of news, and for newspapers to have different cost structures the first paper, published in the International Journal of Industrial Organisation, finds that reducing VAT rates on digital newspapers leads to higher prices for readers. The second paper, published in European State Aid Quarterly, describes and applies the findings of the first paper and associated literature to a decision made by the European Free Trade Area Surveillance Authority (ESA). The decision permitted a temporary reduction of VAT on digital newspapers in Norway. We confirm that even a tax reduction which equalises tax conditions between printed and digital newspapers qualifies as State Aid. However, the Norwegian authorities argued that the State aid should be allowed as the tax reduction would reduce prices and increase consumption. This finding goes against the findings of Chapter 1, and as such we argue that the ESA did not have grounds to accept the aid as being compatible with the single market. The third paper uses the recent expansion of Vinmonopolet to examine the relationship between alcohol consumption and sick leave. Our core finding is that an increase in alcohol consumption of 1 percent leads to an increase of sick leave in men of around 0.3 per 10,000 men, an increase of around 0.16 percent, at the mean. The fourth paper returns to the market for newspapers and investigates the impact of digital newspapers imposing paywalls on news consumption. This is a central question for digital newspapers, as they need to carefully weigh the increased revenue from charging readers for news against lost advertising revenues if they receive less views. When newspapers introduce a paywall we find that short run consumption of news falls by 3-4 percent, and continues to fall by between 9-11 percent in the long run.