Estimation of cost efficiencies from mergers: application to US radio

Przemyslaw Jeziorski

RAND Journal of Economics, 2014, vol. 45, issue 4, 816-846

Abstract: type="main">

This article estimates fixed-cost efficiencies from mergers using a dynamic oligopoly model in which mergers and repositioning of products are endogenous. The inference is based on revealed preference approach selecting cost synergies that rationalize observed merger decisions. The estimates can be used to assess the total welfare impact of retrospective and counterfactual mergers. The framework is applied to estimate cost efficiencies after the 1996 deregulation of U.S. radio industry. Within the period of 1996 to 2006 the cost savings resulting from mergers amount to $1.2 billion per year (equally split across economies of scale and within-format cost synergies).

Date: 2014
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