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Merger enforcement in two-sided markets

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  • Przemyslaw Jeziorski

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).

Suggested Citation

  • Przemyslaw Jeziorski, 2010. "Merger enforcement in two-sided markets," Economics Working Paper Archive 570, The Johns Hopkins University,Department of Economics.
    • Handle: RePEc:jhu:papers:570
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    File URL: http://www.econ2.jhu.edu/REPEC/papers/wp570.pdf
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    References listed on IDEAS

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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.
    2. L'Ecuyer, Pierre & Andres, Terry H., 1997. "A random number generator based on the combination of four LCGs," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 44(1), pages 99-107.
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    Cited by:

    1. Lapo Filistrucchi & Damien Geradin & Eric van Damme, 2012. "Identifying Two-Sided Markets," Working Papers - Economics wp2012_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2012. "Media market concentration, advertising levels, and ad prices," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 321-325.
    3. Lapo Filistrucchi & Tobias J. Klein & Thomas O. Michielsen, 2012. "Assessing Unilateral Merger Effects In A Two-Sided Market: An Application To The Dutch Daily Newspaper Market," Journal of Competition Law and Economics, Oxford University Press, vol. 8(2), pages 297-329.
    4. Roberto Bombana & Carla Marchese, 2014. "Designing fees for music copyright holders in radio services," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2014(2), pages 5-19.

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