The Effect Of Entry And Market Structure On Cellular Pricing Tactics
AbstractWe test the effect of entry on the tariff choices of incumbent cellular firms. We relate the change in the breadth of calling plans between 1996, when incumbents enjoyed a duopoly market, and 1998, when incumbents faced increased competition from personal communications services (PCS) firms. Entry by PCS competitors differed across geographic markets due to the number of licenses left undeveloped as a result of the bankruptcy of some of the auctions’ winning bidders and due to variation across markets in the time required to build a sufficiently large network of wireless infrastructure. We find that incumbents increase tariff variety in markets with more entrants and that this effect is not explained by demographic heterogeneity or cost differences in maintaining calling plans across markets. We also find that incumbents are more likely to upgrade their technology from the old analog technology to the new digital technology in markets with more entry, suggesting that entry also has indirect effects on tariff choice via firms’ technology adoption decisions.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 03-13.
Length: 47 pages
Date of creation: Nov 2003
Date of revision: Nov 2003
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Web page: http://www.NETinst.org/
entry; market structure; cellular; price discrimination; nonlinear pricing; telecommunications;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-26 (All new papers)
- NEP-ENT-2006-08-26 (Entrepreneurship)
- NEP-ICT-2006-08-26 (Information & Communication Technologies)
- NEP-MIC-2006-08-26 (Microeconomics)
- NEP-MKT-2006-08-26 (Marketing)
- NEP-NET-2006-08-26 (Network Economics)
- NEP-TID-2006-08-26 (Technology & Industrial Dynamics)
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