Strategic Interaction in the Dutch Market for Consumer Magazines

Information goods such as newspapers and magazines have a number of distinct economic characteristics such as a high fixed cost – low marginal (variable) cost structure and the possibility to subsidize content through selling advertising space. We develop a simple one-shot duopoly model that analyses strategic interaction in a market with such features. We focus on the firms best responses and test the theoretical predictions of the model empirically by panel regression techniques using a balanced panel data set of 60 Dutch consumer magazines over the period 1991–1998. Our 3SLS estimation results confirm the prediction of our model that the Dutch market for consumer magazines is characterized by strategic complementarity between magazine and ad prices.