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

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).