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Empirical Evidence on the Relationship between Mobile Termination Rates and Firms' Profits

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  • Kjetil Andersson
  • Øystein Foros
  • Bjørn Hansen

Abstract

The theoretical literature on mobile termination rates (MTRs) is inconclusive on how the level of MTRs affects overall consumer charges and firms' profits. We show that when firms offer bundles with fixed included usage – a tariff structure that has become more common in recent years – an identical change in all MTRs does not affect firms' retail prices or profits. We use a panel dataset from saturated European markets to estimate the effect of MTRs on mobile operators' profits. As predicted by the theoretical model, we cannot reject the fact that firms' profits are unaffected by an identical change in all MTRs.

Suggested Citation

  • Kjetil Andersson & Øystein Foros & Bjørn Hansen, 2016. "Empirical Evidence on the Relationship between Mobile Termination Rates and Firms' Profits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(1), pages 129-149, January.
  • Handle: RePEc:bla:scandj:v:118:y:2016:i:1:p:129-149
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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