The Effects Of Competition On The Price For Cable Modem Internet Access
AbstractAn important issue in economics is how market structure affects prices. While the standard view is that competition lowers prices, Chen and Riordan (2006) argued that with product differentiation it is not exceptional for prices to be higher under duopoly than monopoly. This paper empirically investigates one implication from Chen and Riordan, namely, that prices are lower under duopoly when consumer preferences for the two products are similar, and they are more likely to be higher under duopoly if consumer preferences for the two products are more diverse. Focusing on the price for cable modem Internet access, with or without competition from a digital subscriber line provider, and using education dispersion as a proxy for consumer preference diversity, we find empirical support for this implication. In markets where education dispersion is low, competition reduces prices. As education dispersion increases, the negative effect of competition on prices diminishes; and when the dispersion is high enough, competition increases prices.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 07-13.
Length: 28 pages
Date of creation: Sep 2007
Date of revision:
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Web page: http://www.NETinst.org/
competition; Internet; preference diversity; prices;
Other versions of this item:
- Yongmin Chen & Scott J Savage, 2011. "The Effects of Competition on the Price for Cable Modem Internet Access," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 201-217, February.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-20 (All new papers)
- NEP-COM-2007-10-20 (Industrial Competition)
- NEP-ICT-2007-10-20 (Information & Communication Technologies)
- NEP-MIC-2007-10-20 (Microeconomics)
- NEP-MKT-2007-10-20 (Marketing)
- NEP-NET-2007-10-20 (Network Economics)
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.:
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- âThe Effects of Competition on Price for Cable Modem Internet Access,â Y. Chen & S. Savage (2009)
by afinetheorem in A Fine Theorem on 2010-11-12 19:30:49
- The Effects of Competition on Price for Cable Modem Internet Access, Y. Chen & S. Savage (2009)
by afinetheorem in A Fine Theorem on 2010-11-12 19:30:49
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