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Is there a level of competition intensity that maximizes investment in the mobile telecommunications industry?

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  • Houngbonon, Georges Vivien
  • Jeanjean, Francois

Abstract

This paper empirically assesses the impact of the intensity of competition on investment in new technologies within the mobile telecommunications industry. Using firm level panel data and an instrumental variable estimation it finds an inverted-U relationship between competition intensity and investment. The intermediate level of competition intensity that maximizes investment stands at 62 percent, whereby competition intensity is measured by 1-Lerner index at the firm level. This means that the maximal level of investment is reached, on average, when the operating pro t represents 38 percent of total revenue. This result is rationalized through a theoretical model that yields an inverted-U relationship between competition and investment. It shows that the potential technological progress, measured by the impact of investment on the reduction of marginal cost, is the main determinant of the investment maximizing intermediate level of competition. The higher the potential technological progress, the lower the level of competition intensity that maximizes investment

Suggested Citation

  • Houngbonon, Georges Vivien & Jeanjean, Francois, 2014. "Is there a level of competition intensity that maximizes investment in the mobile telecommunications industry?," 25th European Regional ITS Conference, Brussels 2014 101384, International Telecommunications Society (ITS).
    • Handle: RePEc:zbw:itse14:101384
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    Cited by:

    1. François Jeanjean, 2015. "What causes the megabyte price drop in the mobile industry?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(3), pages 277-296, September.
    2. Stephane Ciriani & Marc Lebourges, 2016. "The role of market power in economic growth: an analysis of the differences between EU and US competition policy theory, practice and outcomes," European Journal of Government and Economics, Europa Grande, vol. 5(1), pages 5-28, June.
    3. Otello Ardovino & Marco Delmastro, 2021. "An empirical analysis of the impact of structural changes in the mobile market," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(2), pages 257-274, June.
    4. George Houpis & Jose Maria Rodriguez & Goran Serdarević & Tom Ovington, 2016. "The Impact of Network Competition in the Mobile Industry," Competition and Regulation in Network Industries, , vol. 17(1), pages 32-54, March.
    5. Houpis, George & Rodriguez, Jose Maria & Ovington, Thomas & Serdarevic, Goran, 2015. "The impact of network competition in the mobile industry," 26th European Regional ITS Conference, Madrid 2015 127147, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    Competition; Investment; Mobile Telecommunications;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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