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Effects of Mergers in Two-Sided Markets: The US Radio Industry †

Effects of Mergers in Two-Sided Markets: The US Radio Industry † Abstract This study examines mergers in two-sided markets using a structural supply-and-demand model that employs data from the 1996–2006 merger wave in the US radio industry. In particular, it identifies the conflicting incentives for merged firms to exercise market power on both listener and advertiser sides of the market, and disaggregates the effects of mergers into changes in product variety and advertising quantity. Specifically, it finds 0.2 percent listener welfare increase (+0.3 percent from increased product variety, and −0.1 percent from decreased ad quantity) and 21 percent advertiser welfare decrease (−17 percent from changes in product variety, and −5 percent from decreased ad quantity). (JEL G34, L13, L82, L88, M37 ) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Effects of Mergers in Two-Sided Markets: The US Radio Industry †

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Publisher
American Economic Association
Copyright
Copyright © 2014 by the American Economic Association
Subject
Articles
ISSN
1945-7685
eISSN
1945-7685
DOI
10.1257/mic.6.4.35
Publisher site
See Article on Publisher Site

Abstract

Abstract This study examines mergers in two-sided markets using a structural supply-and-demand model that employs data from the 1996–2006 merger wave in the US radio industry. In particular, it identifies the conflicting incentives for merged firms to exercise market power on both listener and advertiser sides of the market, and disaggregates the effects of mergers into changes in product variety and advertising quantity. Specifically, it finds 0.2 percent listener welfare increase (+0.3 percent from increased product variety, and −0.1 percent from decreased ad quantity) and 21 percent advertiser welfare decrease (−17 percent from changes in product variety, and −5 percent from decreased ad quantity). (JEL G34, L13, L82, L88, M37 )

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Nov 1, 2014

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