Showing papers by "Øystein Foros published in 2018"
TL;DR: In this article, the authors proposed an incremental pricing model for advertising-financed media, which assumes consumers patronise a single media platform, precluding effective competition for advertisers, and the principle of incremental pricing implies that multi-homing consumers are less valuable to platforms.
Abstract: Standard models of advertising-financed media assume consumers patronise a single-media platform, precluding effective competition for advertisers. Such competition ensues if consumers multi-home. The principle of incremental pricing implies that multi-homing consumers are less valuable to platforms. Then entry of new platforms decreases advertisement prices, while a merger increases them, and advertisement-financed platforms may suffer if a public broadcaster carries advertisements. Platforms may bias content against multi-homing consumers, especially if consumers highly value overlapping content and/or second impressions have low value.
78 citations
01 Dec 2018
TL;DR: Gramstad et al. as mentioned in this paper show that consumers leave increasingly more digital footprints which improve the ability of personalized pricing and argue that it is optimal for a retailer that price discriminates to set the purchasing price equal to marginal costs from consumers who buy from a rival.
Abstract: Consumers leave increasingly more digital footprints which improve
rmsability to practice personalized pricing (
rst-degree price discrimination). We ask whether there exist strategic e¤ects that reduce
rmsincentives to do so. To answer this question, we
rst note that it is optimal for a
rm that price discriminates to set the purchasing price equal to marginal costs from consumers who buy from a rival. This is true independently of whether the rival has made any non-price commitments (e.g. strategic product di¤erentiation). In contrast, if a
rm uses uniform pricing, the rival has incentives to make strategic commitments that soften competition. Consequently, we
nd that
rms might
nd it optimal to commit to uniform pricing to avoid being trapped in a highly competitive equilibrium. The key insight is that a
rms incentives to undertake strategic price-softening behavior depend on the rivals choice between uniform and personalized pricing, and not the
rms own choice. 1We thank Arne Rogde Gramstad, Kenneth Fjell, Jarle Møen and seminar participants at Forskermøtet, FIBE and faculty seminars at NHH Norwegian School of Economics for useful discussions. Further, we thank Greg Sha¤er for very helpful comments and suggestions. SNF Working Paper No 07/18
1 citations