Competition and Price Discrimination in Yellow Pages Advertising

Abstract

This paper examines the effect of competition on second degree price discrimination in display advertising in Yellow Page directories. Our main empirical finding is that while competition is associated with lower prices, the association is not proportional along the range of product offerings. Instead, directories that face more competitors offer price schedules that display a greater degree of curvature than directories facing less competition. This means that purcahsers of the largest ads pay less per ad size relative to purchasers of small ads for ads in more competitive directories.