Platform Mergers: Lessons from a Case in the Digital TV Market

Marc Ivaldi and Jiekai Zhang

No 20-1112, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.

Keywords: Two-sided market; platform merger; advertising; TV market; competition policy (search for similar items in EconPapers)
JEL-codes: K21 L10 L40 L82 M37 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-com, nep-cul, nep-ind, nep-law and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Platform Mergers: Lessons from a Case in the Digital TV Market (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:124370

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