Publication: A nonlinear product differentiation model à la Cournot: a new look to the newspapers industry
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2013-07
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Abstract
In this work, we develop a new model for competition in markets with differentiated products. In
addition, we present a consumer model designed to produce a flexible nonlinear inverse demand
system that resembles the classical Multinomial Logit model, and discuss several extensions. We
characterize firms competition in quantities based on the inverse demand system. The model is
applied to the Spanish newspaper industry. This is a highly competitive two-sided market whose
revenues are generated from sales and to a larger extent from advertising driven by its circulation.
We then characterize the Perfect Equilibrium by conditional moment conditions, and estimate the
parameters using the Generalized Method of Moments
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Keywords
Newspapers, Differentiated products, Dynamic equilibrium, Generalized method of moments, Advertising expenditure, Time series, Persistence, Cointegration, Structural changes