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Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry

Authors


  • We thank Can Erutku, Shane Greenstein, Ulrich Kaiser, Aviv Nevo, Chuck Romeo, Tom Ross, Larry White, Ralph Winter, the coeditor, and two referees for helpful comments and Howard Hirshhorn for providing circulation data for the Globe and Mail. We are especially grateful to Rob Porter for giving us the initial idea for this project.

Abstract

In this paper, we study mergers in two-sided industries and, in particular, the effects of mergers in the newspaper industry. We present a model which shows that mergers in two-sided markets may not necessarily lead to higher prices for either side of the market. We test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. We find that greater concentration did not lead to higher prices for either newspaper subscribers or advertisers.

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