Managerial Economics and Stupid Conservatives

So, The New York Times accepts advertisements that are either guaranteed to run, or run on a standby basis. It prices the latter much more cheaply.

This is pretty standard business practice. A newspaper does a standard print run every day, whether the paper is full or not. It makes sense to discount the price of advertisements in exchange for a guaranteed slot. This is sort of like an airline reducing the price of tickets as flight time approaches, or allowing the purchase of standby tickets to cover no-shows.

In theory, there's no economic problem there - even if the liberal leaning Times is offering standby advertising to Move-On. The fact that some Republicans see a problem there does not speak well of their potential for steering the oil tanker that is the U.S. economy.

For empirical purposes, there is a tiny problem though. The Times was able to discount the price by a bit more than 60%. Presumably this gets them down to the marginal cost, and using standard formulas available in undergraduate texts this suggests an elasticity of -1.6.

I'm sticking my neck out here, but to me that seems insufficiently elastic. The New York Times has quite a few competitors. The more competitors, the lower the incremental markup, and the smaller the discount that can be offered for standby advertisers.

So ... I think the Republican complaints are based on sour grapes, but I also think it would be worthwhile if someone more nuanced in the economics of advertising elasticities took a good look at the size of that discount. Maybe what the Republicans smell really is a rat.