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Merger enforcement in two-sided markets

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  • Przemyslaw Jeziorski
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    Abstract

    This paper studies mergers in two-sided markets by estimating a structural supply and demand model and performing counterfactual experiments. The analysis is performed on data for a merger wave in U.S. radio that occurred between 1996 and 2006. The paper makes two main contributions. First, I identify the conflicting incentives of merged firms to exercise market power on both sides of the market (listeners and advertisers in the case of radio). Second, I disaggregate the effects of mergers on consumers into changes in product variety and changes in supplied ad quantity. I find that firms have moderate market power over listeners in all markets, extensive market power over advertisers in small markets and no market power over advertisers in large markets. Counterfactuals reveal that extra product variety created by post-merger repositioning increased listeners' welfare by 1.3% and decreased advertisers' welfare by about $160m per-year. However, subsequent changes in supplied ad quantity decreased listener welfare by 0.4% (for a total impact of +0.9%) and advertiser welfare by an additional $140m (for a total impact of -$300m).

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    File URL: http://econ.jhu.edu/wp-content/uploads/pdf/papers/wp570.pdf
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    Bibliographic Info

    Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 570.

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    Date of creation: Jul 2010
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    Handle: RePEc:jhu:papers:570

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    1. Esther Gal-Or & Anthony Dukes, 2006. "On the Profitability of Media Mergers," The Journal of Business, University of Chicago Press, vol. 79(2), pages 489-526, March.
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    Cited by:
    1. Bombana, Roberto & Marchese, Carla, 2012. "Designing Fees for Music Copyright Holders in Radio Services," POLIS Working Papers 166, Institute of Public Policy and Public Choice - POLIS.
    2. Simon P. Anderson & Oystein Foros & Hans Jarle Kind & Martin Peitz, 2011. "Media Market Concentration, Advertising Levels, and Ad Prices," CESifo Working Paper Series 3677, CESifo Group Munich.
    3. Filistrucchi, L. & Geradin, D.A.A.G. & Damme, E.E.C. van, 2012. "Identifying Two-Sided Markets," Discussion Paper 2012-008, Tilburg University, Tilburg Law and Economic Center.
    4. Filistrucchi, L. & Klein, T.J. & Michielsen, T.O., 2011. "Assessing Unilateral Merger Effects in a Two-Sided Market: An Application to the Dutch Daily Newspaper Market," Discussion Paper 2011-046, Tilburg University, Tilburg Law and Economic Center.
    5. Filistrucchi, L. & Antonielli, M., 2012. "Collusion and the Political Differentiation of Newspapers," Discussion Paper 2012-024, Tilburg University, Center for Economic Research.

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