Competition and Price Discrimination in Yellow Pages Advertising

We examine the effect of competition on second-degree price discrimination in display advertising in Yellow Pages 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 purchasers of the largest ads pay less per ad size relative to purchasers of small ads in more-competitive directories.