Estimating Demand with Multi-Homing in Two-Sided Markets

We empirically investigate the relevance of multi-homing in two-sided markets. First, we build a micro-founded structural econometric model that encompasses demand for differentiated products and allows for multi-homing on both sides of the market. We then use an original dataset on the Italian daily newspaper market that includes information on double-homing by readers to estimate readers’ and advertisers’ demand. The results show that an econometric model that does not allow for multi-homing is likely to produce biased estimates of demand on both sides of the market. In particular, on the reader side, accounting for multi-homing helps to recognize complementarity between products; on the advertising side, it allows to measure to what extent advertising demand depends on the shares of exclusive and overlapping readers.