Pricing and efficiency of a circulation industry: The case of newspapers

Abstract The trend towards monopolization of the Australian newspaper industry is a topic invoking considerable public comment. This paper addresses some of the issues associated with a monopoly in this industry. In particular, we analyze the pricing policies for a newspaper proprietor under different market structures. It is shown that the special structure of the newspaper market; namely the duality in product space (since newspaper proprietors service two markets: advertisers and consumers of newspapers) can render the conventional neoclassical wisdom about monopoly pricing incorrect. Moreover, the theory is supported by empirical investigation of the Australian newspaper industry.