Prices, Margins and Liquidity Constraints: Swedish Newspapers 1990-1996

Abstract

For Swedish newspaper firms, a market with high switching costs, the subscription market, and a market with low switching costs, the advertising market, are of approximately equal importance. When Sweden enters a deep recession, we find that liquidity constraints influence the pricing decision in the former, but not the latter market. This gives support to theories stressing the magnifying effect of liquidity constraints on the business cycle.Liquidity constraints; switching costs; price adjustment; newspaper industry