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Entry in telecommunication: customer loyalty, price sensitivity and access prices

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  • Lommerud, Kjell Erik
  • Sorgard, Lars

Abstract

The purpose of this article is to investigate the prospects for entry into an existing network in the telecommunication industry, and how public policy may promote a more competitive outcome. We apply a model that captures the fact that the incumbent has an installed base of loyal consumers, some consumers are price sensitive, and the entrant is charged an access fee for entering the network. We distinguish between classical (de novo) entry and reciprocal entry (incumbent entering the neighbouring market), and analyse how such public policy measures as (i) publication of prices by the authorities and (ii) lower access fees affect the competitive outcome. In the reciprocal entry model we find that lower access fees tend to discourage entry into a neighbouring market, while the publishing of prices has an ambiguous effect on entry.
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Suggested Citation

  • Lommerud, Kjell Erik & Sorgard, Lars, 2003. "Entry in telecommunication: customer loyalty, price sensitivity and access prices," Information Economics and Policy, Elsevier, vol. 15(1), pages 55-72, March.
    • Handle: RePEc:eee:iepoli:v:15:y:2003:i:1:p:55-72
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    References listed on IDEAS

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    Cited by:

    1. Netai Saha & Md. Rashidul Islam & Asif Hoque, 2016. "Factors Affecting Customers’ Satisfaction of Mobile Phone Subscribers: An Empirical Study on Mobile Telecommunication Industry in Bangladesh," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(6), pages 252-252, May.
    2. Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2007. "Gatekeeping in health care," Journal of Health Economics, Elsevier, vol. 26(1), pages 149-170, January.
    3. Viergutz, Tim & Schulze-Ehlers, Birgit, 2018. "The use of hybrid scientometric clustering for systematic literature reviews in business and economics," DARE Discussion Papers 1804, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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