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Effects of Spectrum Holdings on Equilibrium in the Wireless Industry

Author

Listed:
  • Lhost Jonathan

    (Lawrence University, Appleton, WI, United States of America)

  • Pinto Brijesh

    (World Bank Group, Washington, DC, United States of America)

  • Sibley David

    (University of Texas at Austin, Austin, TX, United States of America)

Abstract

We propose a model of Bertrand competition in which consumers choose firms based on prices and qualities. Service quality depends on congestion, which is a function of capacity and output. We first present theoretical properties of the model. Next, we calibrate the model to the wireless industry and use it to evaluate the impacts of changes in spectrum allocation on consumer welfare and profits. Simulations of the model show that when one firm acquires more spectrum, consumer welfare at all firms increases due to congestion externality effects. We find that a transfer of spectrum from one firm to another can either raise or lower consumer welfare at the firms not involved in the transaction, again due to externality effects. Where it is possible to compare the results of our model to the wireless industry, they are consistent with the data. We also explore some possible effects of the upcoming 2016 spectrum auctions.

Suggested Citation

  • Lhost Jonathan & Pinto Brijesh & Sibley David, 2015. "Effects of Spectrum Holdings on Equilibrium in the Wireless Industry," Review of Network Economics, De Gruyter, vol. 14(2), pages 111-155, June.
    • Handle: RePEc:bpj:rneart:v:14:y:2015:i:2:p:111-155:n:1
    DOI: 10.1515/rne-2015-0008
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    References listed on IDEAS

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    2. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    3. Simon Loertscher & Leslie Marx, 2014. "An Oligopoly Model for Analyzing and Evaluating (Re)-Assignments of Spectrum Licenses," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(3), pages 245-273, November.
    4. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
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    6. Patrick Sun, 2014. "Quality Competition in Mobile Telecommunications: Evidence from Connecticut," Working Papers 14-05, NET Institute.
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    Cited by:

    1. Jeanjean, Francois & Lebourges, Marc & Liang, Julienne, 2018. "Mobile investment and traffic per capita tend to increase with license duration," 29th European Regional ITS Conference, Trento 2018 184949, International Telecommunications Society (ITS).

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