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Market Penetration and Late Entry in Mobile Telephony

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Abstract

We consider some two dynamic models of entry in mobile telephony, with and without strategic pricing, and taking into account market penetration at entry, locked-in consumers and tariff-mediated network externalities. We show that on/off-net differentials may reduce the possibility of entry if incumbents are large, while they have no long-run effects if there are no locked-in consumers, or reduce the difference in subscriber numbers in their presence. Asymmetric fixed-to-mobile or mobile-to-mobile termination rates increase (decrease) market share and profit of the network with the higher (lower) rate. While the fixed-to-mobile waterbed effect is not full at the network level, it will be full in the aggregate.

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File URL: http://www.netinst.org/Hoernig_08-38.pdf
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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 08-38.

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Length: 28 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
Handle: RePEc:net:wpaper:0838

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Web page: http://www.NETinst.org/

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Keywords: Mobile Telephony; Entry; Penetration; Mobile termination rates;

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References

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  1. Heli Koski & Tobias Kretschmer, 2005. "Entry, standards and competition : firm strategies and the diffusion of mobile telephony," LSE Research Online Documents on Economics 801, London School of Economics and Political Science, LSE Library.
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Cited by:
  1. Harbord, David & Hoernig, Steffen, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," CEPR Discussion Papers 7730, C.E.P.R. Discussion Papers.
  2. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.

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