Estimation of cost synergies from mergers without cost data: Application to U.S. radio
AbstractThis paper develops a new way to estimate cost synergies from mergers without using actual data on cost. The estimator uses a structural model in which companies play a dynamic game with endogenous mergers and product repositioning decisions. Such a formulation has several benefits over the widespread static merger analysis. In particular, it corrects for sample selection of more profitable mergers and captures follow-up mergers and post-merger product repositioning. The framework is applied to estimate cost efficiencies after the deregulation of U.S. radio in 1996. The procedure uses the data on radio station characteristics and numerous acquisitions, without explicit need for cost data. It turns out that between 1996 and 2006 additional ownership concentration generated $2.5b per-year cost savings, which is about 10% of total industry revenue.
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Bibliographic InfoPaper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 571.
Date of creation: Jul 2010
Date of revision:
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- 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.
- Howard Smith & Catherine O'Gorman, 2008.
"Efficiency Gain from Ownership Deregulation: Estimates for the Radio Industry,"
Economics Series Working Papers
385, University of Oxford, Department of Economics.
- O'Gorman, Catherine & Smith, Howard, 2008. "Efficiency Gain from Ownership Deregulation: Estimates for the Radio Industry," CEPR Discussion Papers 6699, C.E.P.R. Discussion Papers.
- Marc Rysman & Ginger Zhe Jin, 2012. "Platform Pricing at Sports Card Conventions," Boston University - Department of Economics - Working Papers Series WP2012-015, Boston University - Department of Economics.
- Mitsukuni Nishida, 2012. "Estimating a Model of Strategic Network Choice: The Convenience-Store Industry in Okinawa," Economics Working Paper Archive 594, The Johns Hopkins University,Department of Economics.
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