Abstract: I study competitive forces that determine the impact of a value added tax (VAT) reduction for digital newspapers on readership and supply of digital news. First, I formulate a model of digital newspaper demand and entry in which newspapers compete for both readers and advertisers. A VAT reduction raises readership if the price competition, market expansion and matching effects from additional entry outweigh the direct pricing effect on consumers. Second, I calibrate the model parameters using Norwegian data on digital newspaper readership, prices, and revenues. The calibrated model implies that the VAT rate reduction by Norway in 2016 has increased consumer surplus and has reduced the news under-supply in the market. Finally, I explore alternative policies: by accounting for the two-sidedness of digital news, a value added advertising subsidy is more effective than a VAT reduction in increasing readership since it leads to a direct price decrease as well as additional entry.
Abstract: I study the incentives of an incumbent platform to use a long-term contract for sellers to deter efficient entry. Whether a long-term contract is an anti-competitive instrument hinges on the homing assumption of the two sides - that is, if a side wants to engage with the other side on only one or multiple platforms. If sellers single-home and consumers can multi-home or cross-group externalities are absent, I formally show that the Chicago critique holds due to intense competition for sellers: sellers do not sign a long-term contract that reduces competition unless they are fully compensated for doing so, which the incumbent cannot afford. If the homing assumption is reversed and cross-group externalities are sufficiently large, the incumbent is strictly better off using an exclusive long-term contract. Since the platforms compete for the single-homing consumers, the sellers' surplus is extracted even in the absence of a contract and the incumbent can readily incentivize the sellers to sign a contract.
"Quality Investment by Platforms" (draft coming soon)
Abstract: This paper studies incentives to invest in platform quality by organizations that operate either in a one- or two-sided mode. In the one-sided mode, multi-product firms (MPF) produce and sell varieties to consumers themselves. In the two-sided mode, platforms solely act as intermediaries between sellers and consumers. I find that while platforms in either mode under-invest relative to the first-best, MPFs invest more in quality than two-sided platforms. By producing the products themselves, MPFs better account for the cross-group benefits of products for consumers, which gives them an additional incentive to invest in quality to increase the customer base. MPFs make larger profits than two-sided platforms only if the "consumer-expansion" effect is large enough relative to the "business-stealing" effect.