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Endogenous Sunk Costs in the Market for Mobile Telecommunications - The Role of Licence Fees

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  • Harald Gruber

    (European Investment Bank)

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    Abstract

    An oligopoly model with endogenous sunk costs illustrates the trade off between ex ante extraction of oligopoly rents and market entry of firms in the mobile telecommunications industry. Competitive bidding for radio frequency licences provides scope for setting market structure endogenously - the higher the licence fee, the lower the number of competitive firms sustained by the market. High licence fees may be a signal for post-entry collusion.

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    File URL: http://www.esr.ie/Vol33_1Gruber.pdf
    File Function: First version, 2002
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    Bibliographic Info

    Article provided by Economic and Social Studies in its journal Economic and Social Review.

    Volume (Year): 33 (2002)
    Issue (Month): 1 ()
    Pages: 55-64

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    Handle: RePEc:eso:journl:v:33:y:2002:i:1:p:55-64

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    Web page: http://www.esr.ie

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    1. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    2. Theo Offerman & Jan Potters, 2000. "Does Auctioning of Entry Licenses affect Consumer Prices? An Experimental Study," Tinbergen Institute Discussion Papers 00-046/1, Tinbergen Institute.
    3. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers 2000-W26, University of Oxford, Department of Economics.
    4. Gruber, Harald & Verboven, Frank, 2000. "The Evolution of Markets Under Entry and Standards Regulation - The Case of Global Mobile Telecommunications," CEPR Discussion Papers 2440, C.E.P.R. Discussion Papers.
    5. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-162, Summer.
    6. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
    7. Gruber, Harald, 1999. "An investment view of mobile telecommunications in the European Union," Telecommunications Policy, Elsevier, vol. 23(7-8), pages 521-538, August.
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    Cited by:
    1. Erik Bohlin & Gary Madden & Aaron Morey, 2010. "An Econometric Analysis of 3G Auction Spectrum Valuations," RSCAS Working Papers 2010/55, European University Institute.

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