Introduction
The monopoly framework
The duopoly framework
Quality Competition among Platforms: a Media
Market Case
M. R. Battaggion, S. M. Drufuca
A Discussion by M.G. Romano
Naples, November 2014
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
Introduction
I
Nice paper: competently written and well motivated both
theoretically and from an applied point of view!
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
Introduction
I
Nice paper: competently written and well motivated both
theoretically and from an applied point of view!
I
Appealing topic: important issue and interesting results
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
Introduction
I
Nice paper: competently written and well motivated both
theoretically and from an applied point of view!
I
Appealing topic: important issue and interesting results
I
The paper develops a model of vertical differentiation in a
two-sides market both in the monopoly and in the duopoly
context
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
Novel insights on the ”correlation” between advertising and
platform quality .
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
I
Novel insights on the ”correlation” between advertising and
platform quality .
Main message: a sort of substitutability between advertising
and quality
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
I
Novel insights on the ”correlation” between advertising and
platform quality .
Main message: a sort of substitutability between advertising
and quality
I
profit neutrality implies that revenues from the advertising side
are counterbalanced by a decrease on the subscription fees
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
I
Novel insights on the ”correlation” between advertising and
platform quality .
Main message: a sort of substitutability between advertising
and quality
I
I
profit neutrality implies that revenues from the advertising side
are counterbalanced by a decrease on the subscription fees
subscription fees positively depend on quality
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
In the real world any platform offers a menu of contracts to
potential viewers.
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
In the real world any platform offers a menu of contracts to
potential viewers.
I
What if the monopolist can differentiate his strategy by
offering different quality levels to different prices?
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I
In the real world any platform offers a menu of contracts to
potential viewers.
I
What if the monopolist can differentiate his strategy by
offering different quality levels to different prices?
I
Could this increase the monopolist profits on both sides of the
market.
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I Proposition 3 states that when advertisers are uniformly
distributed, in equilibrium the monopolist provides the
maximum level of quality.
I
This result seems to be more general.
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The monopoly framework
Comments and perspectives
I Proposition 3 states that when advertisers are uniformly
distributed, in equilibrium the monopolist provides the
maximum level of quality.
I
I
This result seems to be more general.
For the media market analysis, the duopoly assumption is
probably more appropriate.
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments
I
There are 2 platforms: the high quality platform and the low
quality platform
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments
I
I
There are 2 platforms: the high quality platform and the low
quality platform
Main messages:
I
I
both platforms just compete on viewers (the single-homing
part)
profits increase in qualities differentiation
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments
I
I
There are 2 platforms: the high quality platform and the low
quality platform
Main messages:
I
I
I
both platforms just compete on viewers (the single-homing
part)
profits increase in qualities differentiation
Why important? It proves the robustness of Armstrong and
Weeds (07) results
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments and perspectives
I
In the paper the platform quality choice has only an indirect
effect (through tariffs) on advertisers profits.
I
It would be very nice to analyze the equilibrium in a more
complex setting where, for example, the consumers’ taste for
quality (β) is correlated with the advertising disutility (δ),
and/or consumers with different β exhibit different willingness
to pay (α).
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments and perspectives
I
In the paper the platform quality choice has only an indirect
effect (through tariffs) on advertisers profits.
I
It would be very nice to analyze the equilibrium in a more
complex setting where, for example, the consumers’ taste for
quality (β) is correlated with the advertising disutility (δ),
and/or consumers with different β exhibit different willingness
to pay (α).
In the paper:
I
I
I
profits of high quality platform are higher and
as standard in vertical differentiation models, the first entrant
fills the highest quality niche
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
The duopoly framework
Comments and perspectives
I
In the paper the platform quality choice has only an indirect
effect (through tariffs) on advertisers profits.
I
It would be very nice to analyze the equilibrium in a more
complex setting where, for example, the consumers’ taste for
quality (β) is correlated with the advertising disutility (δ),
and/or consumers with different β exhibit different willingness
to pay (α).
In the paper:
I
I
I
I
profits of high quality platform are higher and
as standard in vertical differentiation models, the first entrant
fills the highest quality niche
If advertisers profits depend on the viewers taste for quality, a
low-quality leadership could emerge
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case
Introduction
The monopoly framework
The duopoly framework
Thanks!
A Discussion by M.G. Romano
Quality Competition among Platforms: a Media Market Case