Price Setting Behavior and Returns to Scale in the German Magazine Industry
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		Abstract: I derive a model of profit maximization behavior of print media firms that publish advertising rates long before advertisers decide to post an advertisement. The model is estimated using detailed quarterly data on German women's magazines observed between I/1996 and IV/2001. Main empirical results are that (i) cover price increases lead to substantial reductions in advertising revenue, thereby offsetting possible corresponding gains in magazine sales revenue, (ii) magazines with particularly circulation--sensitive advertising revenues set cover prices well below marginal cost and (iii) there are quantitatively large and highly significant returns to scale in production.
		Keywords: magazines, cost estimation, GMM estimation, twosided markets JEL classification: C33, L11 Status: under revision
	Additional information: Appendix A: the Nested logit Appendix B: main magazine group figures Appendix C: restricted advertising rate estimation Appendix D: instrumentation Appendix E: descriptive statistics Appendix F: validation of estimation results