We investigate theoretically and empirically the determinants of
second-degree price discrimination in two-sided markets. We build a model
in which a newspaper must attract both readers and advertisers. Readers
are uncertain as to their future benefit from reading, and heterogeneous
in their taste for reading. Advertisers are heterogeneous in their outside
option, taste for subscribers, and taste for occasional buyers. To
estimate empirically the effect of the advertisers¹ side of the industry
on price discrimination on the readers¹ side, we use a ³quasi-natural
experiment². We exploit the introduction of advertisement on French
Television in 1968, which we treat as a negative shock on adverting
revenues of daily national newspapers (treated group), but not on daily
local newspapers (control group). We build a new dataset on French local
newspapers between 1960 and 1974 and perform a Differences-in-Differences
analysis. We find robust evidence of increased price discrimination as a
result of a drop in advertising revenues.