Testing The “Waterbed” Effect In Mobile Telephony
AbstractThis paper examines the impact of regulatory intervention to cut termination rates of calls from fixed lines to mobile phones. Under quite general conditions of competition, theory suggests that lower termination charges will result in higher prices for mobile subscribers, a phenomenon known as the âwaterbedâ effect. The waterbed effect has long been hypothesized as a feature of many two-sided markets and especially the mobile telephony industry. Using a uniquely constructed panel of mobile operatorsâ prices and profit margins across more than twenty countries over six years, we document empirically the existence and magnitude of this effect. Our results suggest that the waterbed effect is strong, but not full. We also provide evidence that both competition and market saturation, but most importantly their interaction, affect the overall impact of the waterbed effect on prices.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by European Economic Association in its journal Journal of the European Economic Association.
Volume (Year): 9 (2011)
Issue (Month): 6 (December)
Other versions of this item:
- Genakos, Christos D. & Valletti, Tommaso, 2009. "Testing the "Waterbed" Effect in Mobile Telephony," CEPR Discussion Papers 7611, C.E.P.R. Discussion Papers.
- Christos Genakos & Tommaso Valletti, 2008. "Testing the “Waterbed” Effect in Mobile Telephony," CEIS Research Paper 110, Tor Vergata University, CEIS, revised 11 Jul 2008.
- Christos Genakos & Tommaso Valletti, 2007. "Testing the "Waterbed" Effect in Mobile Telephony," CEP Discussion Papers dp0827, Centre for Economic Performance, LSE.
- L4 - Industrial Organization - - Antitrust Issues and Policies
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Card & Alan B. Krueger, 1993.
"Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania,"
NBER Working Papers
4509, National Bureau of Economic Research, Inc.
- Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
- David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
- Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004.
"How Much Should We Trust Differences-in-Differences Estimates?,"
The Quarterly Journal of Economics,
MIT Press, vol. 119(1), pages 249-275, February.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
- Calzada, Joan & Valletti, Tommaso, 2005.
"Network Competition and Entry Deterrence,"
CEPR Discussion Papers
5381, C.E.P.R. Discussion Papers.
- Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2013.
"Termination fees revisited,"
International Journal of Industrial Organization,
Elsevier, vol. 31(6), pages 738-750.
- Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
- Elena Argentesi & Lapo Filistrucchi, 2007.
"Estimating market power in a two-sided market: The case of newspapers,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
- Elena Argentesi & Lapo Filistrucchi, 2005. "Estimating market power in a two-sided market: the case of newspapers," Economics Working Papers ECO2005/07, European University Institute.
- Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
- Audrey Laporte & Frank Windmeijer, 2005.
"Estimation of Panel Data Models with Binary Indicators when Treatment Effects are not Constant over Time,"
laporte-04-01, University of Toronto, Department of Economics.
- Laporte, Audrey & Windmeijer, Frank, 2005. "Estimation of panel data models with binary indicators when treatment effects are not constant over time," Economics Letters, Elsevier, vol. 88(3), pages 389-396, September.
- Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
- Tomaso Duso, 2005.
"Lobbying and regulation in a political economy: Evidence from the U.S. cellular industry,"
Springer, vol. 122(3), pages 251-276, March.
- Tomaso Duso, 2001. "Lobbying and Regulation in a Political Economy: Evidence from the US Cellular Industry," CIG Working Papers FS IV 01-03, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Kaiser, Ulrich & Wright, Julian, 2006.
"Price structure in two-sided markets: Evidence from the magazine industry,"
International Journal of Industrial Organization,
Elsevier, vol. 24(1), pages 1-28, January.
- Kaiser, Ulrich & Wright, Julian, 2004. "Price Structure in Two-sided Markets: Evidence from the Magazine Industry?," ZEW Discussion Papers 04-80, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
- repec:ner:ucllon:http://discovery.ucl.ac.uk/4324/ is not listed on IDEAS
- Besley, Timothy & Case, Anne, 2000.
"Unnatural Experiments? Estimating the Incidence of Endogenous Policies,"
Royal Economic Society, vol. 110(467), pages F672-94, November.
- Timothy Besley & Anne Case, 1994. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," NBER Working Papers 4956, National Bureau of Economic Research, Inc.
- Armstrong, Mark & Wright, Julian, 2007. "Mobile call termination in the UK," MPRA Paper 2344, University Library of Munich, Germany.
- Duso, Tomaso & Roller, Lars-Hendrik, 2003. "Endogenous deregulation: evidence from OECD countries," Economics Letters, Elsevier, vol. 81(1), pages 67-71, October.
- repec:ner:toulou:http://neeo.univ-tlse1.fr/191/ is not listed on IDEAS
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.