Quality competition and entry: a media market case

The present paper provides an analysis of quality competition and entry in the context of two-sided media platforms. We provide a full characterization of a duopoly equilibrium in terms of advertising levels, subscription fees, and endogenous quality provision. Furthermore, we investigate the role of competition by considering potential entry. We show how the threat of entry shakes the equilibrium configuration by inducing lower quality differentiation. Finally, we describe the conditions under which a deterrence strategy in the form of a “limit quality” is feasible and profitable for the incumbent platform.