What if newspaper B held positions the advertiser didn't want to be identified with? Or had readers the advertiser didn't want to do business with? Or presented their ads in a way that they didn't want? I don't think you can assume the advertiser cares only about the widest audience.

Don't forget that screen-scraping doesn't work in print journalism - transferring the ads is labour-intensive.

But even if the labour was free and paper B was willing to print ads/classifieds for no money, it's still a drain on paper A's resources - running a classifieds department required staff taking calls for placed ads, plus editorial work and similar. If paper B takes those ads and sells them at a lower price, then paper A will lose out on revenue for value created by their staff.

Paper B is not selling ads, nor are they making money from them, they provide them as an alternative means of access to the ads from Paper A.

Advertisers are still paying paper A, so there is no loss of revenue.

If the punters start getting paper B instead of paper A, there is most definitely a loss of revenue.