Merger Analysis in the App Economy: An Empirical Model of Ad-Sponsored Media

59 Pages Posted: 11 Dec 2020 Last revised: 7 Feb 2022

See all articles by Kohei Kawaguchi

Kohei Kawaguchi

Hong Kong University of Science and Technology

Toshifumi Kuroda

Tokyo Keizai University

Susumu Sato

Institute of Economic Research, Hitotsubashi University

Date Written: February 7, 2022

Abstract

Mobile apps are ad-sponsored media with mixed business models of monetization, for which traditional tools for merger analysis that use price variation do not work. This paper proposes a model of mobile apps, in which consumers decide downloads and usage time, and apps compete in price and advertising intensity. We unify prices and advertisements as the sources of a consumer's cost for using the app to generalize the existing tools. We estimate the model using data from Google Play in Japan from 2015 to 2017. We show that we can conduct an extended version of the hypothetical monopolist test, evaluation of upward "cost" pressure, and merger simulation. We also analyze the vertical relation with Google Play. We demonstrate that a reduction of the fee imposed by Google Play can increase the price and hurt consumers for non-game apps, highlighting the importance of considering two-sidedness and mixed business models.

Keywords: Merger simulation, market definition, SSNIP, antitrust policy, ad-sponsored media, mixed business models, platform transaction fee, app economy

JEL Classification: L11, L13, L41, L86, M13, M21.

Suggested Citation

Kawaguchi, Kohei and Kuroda, Toshifumi and Sato, Susumu, Merger Analysis in the App Economy: An Empirical Model of Ad-Sponsored Media (February 7, 2022). TPRC48: The 48th Research Conference on Communication, Information and Internet Policy, Available at SSRN: https://ssrn.com/abstract=3746830 or http://dx.doi.org/10.2139/ssrn.3746830

Kohei Kawaguchi

Hong Kong University of Science and Technology ( email )

6070 LSK Building, HKUST
Clear Water Bay
Kowloon
Hong Kong

Toshifumi Kuroda (Contact Author)

Tokyo Keizai University

1-7-34, Minami-cho, Kokubunji-shi,
Tokyo, Tokyo 185-8502
Japan

HOME PAGE: http://www.tku.ac.jp/~kuroda/index.html

Susumu Sato

Institute of Economic Research, Hitotsubashi University ( email )

Tokyo
Japan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
655
Abstract Views
2,074
rank
57,008
PlumX Metrics