Empirical Model of Dynamic Merger Enforcement—Choosing Ownership Caps in U.S. Radio

The paper introduces a method to conduct a forward-looking antitrust review of horizontal mergers. The method utilizes a dynamic oligopoly model in which mergers, entry/exit, and product repositioning are endogenous. The model provides long-run industry trajectories with and without the merger under review, enabling the regulator to obtain dynamically robust welfare comparisons. The paper demonstrates the framework’s application to regulate the U.S. radio broadcasting industry. In particular, it investigates the long-run efficacy of two commonly used merger heuristics: radio station ownership caps (see the Telecom Act of 1996) and static merger simulations. The paper finds that raising the ownership cap results in higher total welfare and demonstrates varying long-run effectiveness of merger simulations.