What is it about?

We contribute to the analysis of mergers in two-sided markets, in which a platform provides its service for free on one side but obtains all its revenues from the other. A structural model allowing for multi-homing of advertisers is developed to assess a decision of the French competition authority, which approves the merger of the broadcasting services of TV channels but prohibits the merger of their advertising sales services through a behavioral remedy. We show that ignoring the interaction between the two sides of platforms in designing competition or regulatory policy can result in unexpected outcomes.

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Why is it important?

Competition authorities have been particularly concerned in recent years by the behavior of dominant firms in two-sided markets, which provide services on one side but generate revenues on the other, in a way that could harm the interest of consumers. In the internet industry for instance, users search the web free of charge, but trigger advertisements which generate revenues for the firms that supply the search engines. Similarly, in the digital TV market, when viewers watch a program for free, they receive a ow of advertisements that generate revenues for the TV channels. Hence the methodology that we propose to study the digital TV markets can be useful for similar markets like the information search on internet.

Perspectives

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. We hope that people will use our methodology to investigate the working of similar markets.

MARC IVALDI
Toulouse School of Economics

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This page is a summary of: Platform Mergers: Lessons from a Case in the Digital TV Market*, Journal of Industrial Economics, March 2022, Wiley, DOI: 10.1111/joie.12274.
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