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Evaluating Wireless Carrier Consolidation Using Semiparametric Demand Estimation

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  • Patrick Bajari
  • Jeremy T. Fox
  • Stephen Ryan

Abstract

The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. Our semiparametric maximum score estimator controls for consumers%u2019 heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from Amazon or other online retailers where quantities are not observed, but product ranks are observed. Since Amazon data can easily be gathered by researchers, these methods may be useful for the analysis of other product markets where high quality data are not publicly available.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12425.

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Date of creation: Aug 2006
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Publication status: published as Patrick Bajari & Jeremy Fox & Stephen Ryan, 2008. "Evaluating wireless carrier consolidation using semiparametric demand estimation," Quantitative Marketing and Economics, Springer, vol. 6(4), pages 299-338, December.
Handle: RePEc:nbr:nberwo:12425

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Citations

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Cited by:
  1. Nathan H. Miller, 2008. "Competition When Consumers Value Firm Scope," EAG Discussions Papers, Department of Justice, Antitrust Division 200807, Department of Justice, Antitrust Division.
  2. Jason R. Blevins, 2013. "Non-Standard Rates of Convergence of Criterion-Function-Based Set Estimators," Working Papers, Ohio State University, Department of Economics 13-02, Ohio State University, Department of Economics.
  3. Ching-I Huang, 2013. "Intra-household effects on demand for telephone service: Empirical evidence," Quantitative Marketing and Economics, Springer, Springer, vol. 11(2), pages 231-261, June.
  4. Chris Forman & Anindya Ghose & Avi Goldfarb, 2006. "Geography and Electronic Commerce: Measuring Convenience, Selection, and Price," Working Papers, NET Institute 06-15, NET Institute, revised Sep 2006.
  5. Christopher T. Conlon & Julie Holland Mortimer, 2008. "Demand Estimation Under Incomplete Product Availability," NBER Working Papers 14315, National Bureau of Economic Research, Inc.
  6. Ting Zhu & Hongju Liu & Pradeep Chintagunta, 2011. "Wireless Carriers’ Exclusive Handset Arrangements: An Empirical Look at the iPhone," Working Papers, NET Institute 11-35, NET Institute, revised Oct 2011.

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