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Prices, Margins and Liquidity Constraints: Swedish Newspapers, 1990–1992
Author(s) -
Asplund Marcus,
Eriksson Rickard,
Strand Niklas
Publication year - 2005
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.0013-0427.2005.00418.x
Subject(s) - newspaper , solvency , market liquidity , recession , economics , monetary economics , exploit , advertising , business , macroeconomics , computer security , computer science
A firm facing liquidity constraints in a recession may increase its price to exploit locked‐in consumers in an attempt to boost short‐run profits. We find support for such behaviour for Swedish regional newspapers during a deep recession. Newspapers sell both subscriptions and advertising space, and arguably buyers of the latter are less locked in. Newspapers with low solvency raised their subscription prices relative to others. In contrast, the changes in advertising price were independent of the newspapers' financial positions. Hence financial constraints affected firms' pricing behaviour only when consumers were locked in.