Your PDF has successfully downloaded.

You may be interested in finding more content on these topics:


You are not currently logged in.

Access JSTOR through your library or other institution:


Log in through your institution.

On the Profitability of Media Mergers

Esther Gal‐Or and Anthony Dukes
The Journal of Business
Vol. 79, No. 2 (March 2006), pp. 489-525
DOI: 10.1086/499129
Stable URL:
Page Count: 37
  • Download PDF
  • Add to My Lists
  • Cite this Item
We're having trouble loading this content. Download PDF instead.


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.

Notes and References

This item contains 28 references.

  • ['Anderson, S., and S. Coate. 2005. Market provision of broadcasting: A welfare analysis. Review of Economic Studies 72:947–72.']
  • ['Beebe, J. 1977. Institutional structure and program choice in television markets. Quarterly Journal of Economics 91:15–37.']
  • ['Butters, G. 1977. Equilibrium distribution of sales and advertising. Review of Economic Studies 44, no.3:465–91.']
  • ['Chipty, N., and C. Snyder. 1999. The role of buyer size in bilateral bargaining: A study of the cable television industry. Review of Economics and Statistics 81, no. 2:326–40.']
  • ['Deneckere, R., and C. Davidson. 1985. Incentives to form coalitions with Bertrand competition. RAND Journal of Economics 16, no.4:473–86.']
  • ['Dukes, A., and E. Gal‐Or. 2003. Negotiations and exclusivity contracts for advertising. Marketing Science 22, no.2:222–45.']
  • ['Farrell, J., and C. Shapiro. 1990. Horizontal mergers: An equilibrium analysis. American Economic Review 80, no. 1:107–26.']
  • ['Gabszewicz, J., and P. Garella. 1986. ‘Subjective’ price search and price competition. International Journal of Industrial Organization 4, no.3:305–16.']
  • ['Gabszewicz, J., D. Laussel, and N. Sonnac. 2004. Programming and advertising competition in the broadcasting industry. Journal of Economics Management Strategy 13, no. 4:657']
  • ['Gal‐Or, E., and A. Dukes. 2003. Minimum differentiation in commercial media markets. Journal of Economics and Management Strategy 12, no. 3:291–25.']
  • ['Grossman, G., and C. Shapiro. 1984. Informative advertising with differentiated products. Review of Economic Studies 51, no 1:63–81.']
  • ['Horn, H., and A. Wolinsky. 1988. Bilateral monopolies and the incentives for merger. RAND Journal of Economics 19, no. 3:408–19.']
  • ['Inderst, R., and C. Wey. 2003. Bargaining, mergers, and technology choice in bilaterally oligopolistic industries. RAND Journal of Economics 34, no. 1:1–19.']
  • ['Liu, Yong, Daniel S. Putler, and Charles B. Weinberg. 2004. Is having more channels really better? A model of competition among commercial television broadcasters. Marketing Science 23, no. 1:120–33.']
  • ['Masson, R., R. Mudambi, and R. Reynolds. 1990. Oligopoly in advertiser‐supported media. Quarterly Review of Economics and Business 30, no. 2:3–16.']
  • ['McAfee, R. P., and M. A. Williams. 1992. Horizontal mergers and antitrust policy. Journal of Industrial Economics 40, no. 2:181–87.']
  • ['Media Dynamics. 2000. TV Dimensions 2000. New York: Media Dynamics Inc.']
  • ['Myers Report. 2000. New York: Myers Publishing Co.']
  • ['Naik, P., M. Mantrala, and A. Sawyer. 1998. Planning media schedules in the presence of dynamic advertising quality. Marketing Science 17, no. 3:214–35.']
  • ['Osborne, M., and A. Rubinstein. 1994. A course in game theory. Cambridge, MA: MIT Press.']
  • ['Perry, M. K., and R. A. Porter. 1985. Oligopoly and the incentive for horizontal merger. American Economic Review 75, no. 1:219–27.']
  • ['Rubinstein, A. 1982. Perfect equilibrium in a bargaining model. Econometrica 50:97–109.']
  • ['Schmalensee, R., A. Silk, and R. Bojanek. 1983. The impact of scale and media mix on advertising agency costs. Journal of Business 56, no.4:453–75.']
  • ['Siddarth, S., and A. Chattopadhyay. 1998. To zap or not to zap: A study of the determinants of channel switching during commercials. Marketing Science 17, no. 2:124–38.']
  • ['Spence, M., and B. Owen. 1977. Television programming, monopolistic competition and welfare. Quarterly Journal of Economics 91:103–26.']
  • ['Steiner, P. 1952. Program patterns and preferences, and the workability of competition in radio broadcasting. Quarterly Journal of Economics 66:194–223.']
  • ['Tyagi, R. K. 1999. On the effects of downstream entry. Management Science 45, no. 1:59–73.']
  • ['Williamson, O. 1989. Transaction cost economics. In Handbook of Industrial Organization, ed. Richard Schmalensee and R. Willig. Amsterdam: North‐Holland.']