advertising space and circulation. Thus, there is a maximum of advertising space optimising profits from the advertising market Overall. taking both markets into account. Corden concludes that a normal situation is reached, if reader markets are characterised by losses and advertising markets are highly profitable. This situation is due to of the high circulation generated in the reader market which is, of course, higher than the optimal circu- lation considering only the reader market, since a higher number of copies raises the demand for advertising space. Due to a less than proportional effect from circulation on advertising, circulation and editorial quality is naturally restricted A full model of a newspaper monopolist's pricing decision is offered by blair and Romano(1992). Starting from two interrelated demands for copies and ad- vertising, profit maximising pricing rules for each market are derived. In contrast to a standard monopoly price, the(feedback)effect from the respectively opposite market has to be taken into account. Assuming a positive influence of both, the demand for advertising on the demand for copies and vice versa, price decreases on both markets lead to a stronger response in respective quantities in comparison to usual monopolistic situations. Decreasing the copy price, for example, leads to an increase in the demand for copies and, therefore to a rise in the demand for advertising space. The increased advertising volume, in turn, leads to a further increase in copy demand. These direct and indirect effects can be summarised as the phenomenon of the circulation-advertising spiral. Furthermore, because of this spiral the equilibrium copy price is lower than a usual monopoly price and possibly even below marginal cost. Finally, Blair and Romano conclude that vertical integration of newspaper publishers and distributers are a typical conse- quence of this interrelationship because costs can be decreased and copy prices e set optimally.advertising space and circulation. Thus, there is a maximum of advertising space optimising profits from the advertising market. Overall, taking both markets into account, Corden concludes that a ‘normal’ situation is reached, if reader markets are characterised by losses and advertising markets are highly profitable.5 This situation is due to of the high circulation generated in the reader market which is, of course, higher than the optimal circu￾lation considering only the reader market, since a higher number of copies raises the demand for advertising space. Due to a less than proportional effect from circulation on advertising, circulation and editorial quality is naturally restricted. A full model of a newspaper monopolist’s pricing decision is offered by Blair and Romano (1992). Starting from two interrelated demands for copies and ad￾vertising, profit maximising pricing rules for each market are derived. In contrast to a standard monopoly price, the (feedback) effect from the respectively opposite market has to be taken into account. Assuming a positive influence of both, the demand for advertising on the demand for copies and vice versa, price decreases on both markets lead to a stronger response in respective quantities in comparison to usual monopolistic situations. Decreasing the copy price, for example, leads to an increase in the demand for copies and, therefore, to a rise in the demand for advertising space. The increased advertising volume, in turn, leads to a further increase in copy demand. These direct and indirect effects can be summarised as the phenomenon of the circulation-advertising spiral. Furthermore, because of this spiral the equilibrium copy price is lower than a usual monopoly price and possibly even below marginal cost. Finally, Blair and Romano conclude that vertical integration of newspaper publishers and distributers are a typical conse￾quence of this interrelationship because costs can be decreased and copy prices be set optimally. 8