Friday, November 12, 2010
Posted by D. Daniel Sokol
Lapo Filistrucchi, Department of Economics, CentER & TILEC, Tilburg University, Dipertimento di Scienze Economiche, University of Florence; Tobias J. Klein, Tilburg University, Tilburg University - Center for Economic Research (CentER), Institute for the Study of Labor (IZA), Netspar; and Thomas Michielsen, Tilburg University discuss Merger Simulation in a Two-Sided Market: The Case of the Dutch Daily Newspapers.
ABSTRACT: We develop a structural econometric framework that allows us to simulate the effects of mergers among two-sided platforms selling differentiated products. We apply the proposed methodology to the Dutch newspaper industry. Our structural model encompasses demands for differentiated products on both sides of the market and profit maximization by competing oligopolistic publishers who choose subscription and advertising prices, while taking the interactions between the two-sides of the market into account. We measure the sign and size of the indirect network effects between the two sides of the market and simulate the effects of a hypothetical merger on prices and welfare.