Market entry and roll-out with product differentiation
AbstractThis paper examines a general problem exemplified by post-auction (third generation---`3G') mobile telecommunications markets. When entering these (or any other) markets, firms must often decide on the degree of coverage (`roll-out') they wish to achieve. Prior investment must be sunk in order to achieve the desired (or mandated) coverage level. We study the private and social incentives of a would-be entrant into a market with horizontal product differentiation when choosing its level of roll-out. The endogenous extent of entry influences downstream retail prices; Bertrand or local monopoly pricing or a mixed strategy equilibrium may emerge. Importantly, entry may involve too much or too little roll-out from a social perspective, thus suggesting that regulatory intervention may be appropriate to achieve desired levels of competition in such settings.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 176.
Date of creation: 29 Aug 2002
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Other versions of this item:
- Levine, Paul L & Rickman, Neil & Tzavara, Dionisia, 2002. "Market Entry and Roll-out With Product Differentiation," CEPR Discussion Papers 3237, C.E.P.R. Discussion Papers.
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
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