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The Limits of Media See-Saws: Ad-Funded Platform Mergers Can Harm Both Sides

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  • Shiva Shekhar
  • Radostina Shopova

Abstract

We study the welfare effects of a merger between ad-funded platforms facing elastic consumer demand. We show that advertising fees as well as quality investment levels by the platforms fall post-merger. Interestingly, despite the lower advertising fees, advertisers may be worse off when their value of interacting with consumers is high enough. The intuition for this result is that the decrease in quality investments post-merger reduces overall consumer participation. Thus, studying innovation incentives is important in these ad-funded markets as the well-known surplus see-saw result may not hold making both sides of the markets worse while the merged entity emerges as the sole winner.

Suggested Citation

  • Shiva Shekhar & Radostina Shopova, 2025. "The Limits of Media See-Saws: Ad-Funded Platform Mergers Can Harm Both Sides," CESifo Working Paper Series 11768, CESifo.
    • Handle: RePEc:ces:ceswps:_11768
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    References listed on IDEAS

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    More about this item

    Keywords

    Ad-funded platforms; two-sided markets; horizontal mergers; innovation; quality.;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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