Assessing Unilateral Merger Effects in a Two-Sided Market: An Application to the Dutch Daily Newspaper Market
TILEC Discussion Paper No. 2011-046
CentER Discussion Paper Series No. 2011-114
31 Pages Posted: 19 Oct 2011 Last revised: 26 Oct 2011
Date Written: October 19, 2011
Abstract
We compare different methods to assess unilateral merger effects in a two-sided market by applying them to a hypothetical merger in the Dutch newspaper industry. For this, we first specify and estimate a structural model of demand for differentiated products on both the readership and the advertising side of the market. This allows us to recover price elasticities and indirect network effects. Following Filistrucchi, Klein, and Michielsen (2010) marginal costs are then recovered from an oligopoly model of the supply side. We use these estimates of price elasticities, network effects and marginal costs to compare different methods that can be used to evaluate merger effects: We perform a concentration analysis based on the Herfindahl Hirschmann Index, a Small Significant Non-Transitory Increase in Price test, measure Upward Pricing Pressure, and conduct a full merger simulation.
Keywords: two-sided markets, newspapers, advertising, network effects, merger simulation, SSNIP
JEL Classification: L13, L40, L82
Suggested Citation: Suggested Citation
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