Abstract
A free daily newspaper distributes news to readers and sells ad-space to advertisers, having private information about its audience. For a given number of distributed copies, depending on the type of audience (favorable or unfavorable), the newspaper may either have a large readership or a small readership. A large readership provides a greater return to advertisers, because ads are visualized by more people. A favorable audience has also the advantage of requiring a lower distribution cost (for a given number of distributed copies), because readers are willing to exert more effort to obtain a copy of the free newspaper and are less likely to reject a copy that is handed to them. We find that when the audience is unfavorable, the number of distributed copies and the price of ad-space coincide with those of the perfect information scenario. In contrast, if the audience is favorable, the newspaper prints extra copies to send a credible signal to the advertisers that the audience is favorable. Overprinting is not necessarily welfare-detrimental since readers benefit from the existence of additional copies
Reference
Joao Correia da silva, and Joana Resende, “Free daily newspapers: too strong incentives to print?”, Portuguese Economic Journal, vol. 12, n. 2, August 2013, pp. 113–130.
See also
Published in
Portuguese Economic Journal, vol. 12, n. 2, August 2013, pp. 113–130