On the Profitability of Media Mergers

Esther Gal-Or () and Anthony Dukes ()

The Journal of Business, 2006, vol. 79, issue 2, 489-526

Abstract: We examine incentives for nonconsolidating horizontal mergers in commercial media industries. In a model with differentiated media and products, we show that such a merger is profitable if merging media firms gain a relative bargaining advantage vis-à-vis advertisers in the negotiations for advertising space. Whether a bargaining advantage yields profitable conditions for a merger depends on the extent of competition for audiences among media firms. Higher levels of competition make media mergers more profitable. This result contrasts those implied by oligopoly models for traditional product markets, which suggest that mergers become less profitable for higher levels of competition.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:79:y:2006:i:2:p:489-526

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