IDEAS home Printed from https://ideas.repec.org/a/eee/iepoli/v38y2017icp12-22.html
   My bibliography  Save this article

Market structure and investment in the mobile industry

Author

Listed:
  • Jeanjean, François
  • Houngbonon, Georges Vivien

Abstract

The impact of market structure, that is the number of firms and asymmetry, on investment is an important topic in the mobile industry. However, previous literature remains ambiguous about the direction of the relationship. This paper provides an empirical evidence of the impact of market structure on investment in the European mobile industry. The empirical assessment is based on a Salop model with vertical differentiation. Consistently with the prediction of this model, we find that both the number of operators and market share asymmetry have significant effects on investment. In symmetric markets, investment per operator falls with the number of operators, with larger effects for operators that lose market share more than the average. The industry investment rises with the number of operators in the short run, but eventually falls in the long run due to significant adjustment costs of investment in the mobile industry. These findings suggest that investment should be taken into account when analysing the welfare effects of market structure in the mobile industry.

Suggested Citation

  • Jeanjean, François & Houngbonon, Georges Vivien, 2017. "Market structure and investment in the mobile industry," Information Economics and Policy, Elsevier, vol. 38(C), pages 12-22.
    • Handle: RePEc:eee:iepoli:v:38:y:2017:i:c:p:12-22
    DOI: 10.1016/j.infoecopol.2016.12.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167624516301718
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.infoecopol.2016.12.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Jan Boone, 2000. "Competitive Pressure: The Effects on Investments in Product and Process Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 549-569, Autumn.
    3. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    4. Christos Genakos & Tommaso Valletti & Frank Verboven, 2018. "Evaluating market consolidation in mobile communications," Economic Policy, CEPR;CES;MSH, vol. 33(93), pages 45-100.
    5. Pilar Beneito & Paz Coscollá-Girona & María Engracia Rochina-Barrachina & Amparo Sanchis, 2015. "Competitive Pressure and Innovation at the Firm Level," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 422-457, September.
    6. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    7. Schmutzler, Armin, 2013. "Competition and investment — A unified approach," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 477-487.
    8. Michał Grajek & Lars-Hendrik Röller, 2012. "Regulation and Investment in Network Industries: Evidence from European Telecoms," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 189-216.
    9. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    10. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    11. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    12. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    13. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    14. Oecd, 2014. "Wireless Market Structures and Network Sharing," OECD Digital Economy Papers 243, OECD Publishing.
    15. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    16. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    17. Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. François Jeanjean, 2021. "Impact of Technical Progress on the Relationship Between Competition and Investment," Journal of Industry, Competition and Trade, Springer, vol. 21(1), pages 81-101, March.
    2. Ivaldi, Marc & Aimene, Louise & Guiffard, Jean-Baptiste & Liang, Julienne, 2023. "Welfare Cost of Mobile Spectrum (Mis)allocation," CEPR Discussion Papers 18016, C.E.P.R. Discussion Papers.
    3. Bahia, Kalvin & Castells, Pau, 2022. "The dynamic effects of competition on investment: the case of the European mobile communications industry," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265614, International Telecommunications Society (ITS).
    4. Polemis, Michael & Tselekounis, Markos, 2019. "Does deregulation drive innovation intensity? Lessons learned from the OECD telecommunications sector," MPRA Paper 92770, University Library of Munich, Germany.
    5. Houngbonon, Georges Vivien & Ivaldi, Marc & Palikot, Emil & Strusani, Davide, 2023. "The Impact of Shared Telecom Infrastructure on Digital Connectivity and Inclusion," TSE Working Papers 23-1427, Toulouse School of Economics (TSE).
    6. Padmashree Gehl Sampath & Walter Park, 2019. "Do Patents Lead to Market Concentration and Excess Profits?," GDAE Working Papers 19-02, GDAE, Tufts University.
    7. Jeanjean, François & Houngbonon, Georges Vivien, 2016. "Optimal Market Structure in the Mobile Industry," 27th European Regional ITS Conference, Cambridge (UK) 2016 148678, International Telecommunications Society (ITS).
    8. Georges V. Houngbonon & Francois Jeanjean, 2019. "Investment and market power in mobile mergers," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 65-81, March.
    9. Houngbonon, Georges V. & Ivaldi, Marc & Palikot, Emil & Strusani, Davide, 2023. "The Impact of Shared Telecom Infrastructure on Digital Connectivity and Inclusion," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 277970, International Telecommunications Society (ITS).
    10. Liang Wang & Qiming Sun, 2022. "Market Competition, Infrastructure Sharing, and Network Investment in China’s Mobile Telecommunications Industry," Sustainability, MDPI, vol. 14(6), pages 1-17, March.
    11. Bayrak, Tuncay, 2018. "Evaluating large-scale IT investment decisions," Technology in Society, Elsevier, vol. 54(C), pages 128-138.
    12. Aimene, Louise & Jeanjean, François & Liang, Julienne, 2021. "Impact of mobile operator consolidation on unit prices," Telecommunications Policy, Elsevier, vol. 45(4).
    13. Jeanjean, François & Liang, Julienne, 2023. "Market structure and performance in mobile markets. The example of Europe," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 277979, International Telecommunications Society (ITS).
    14. Wellmann, Nicolas, 2019. "Hello . . . Are You Still There? An Empirical Analysis How Market Structure Affects Quality of Mobile Networks," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203579, Verein für Socialpolitik / German Economic Association.
    15. Houngbonon,Georges Vivien & Mensah,Justice Tei & Traore,Nouhoum-000531164, 2022. "The Impact of Internet Access on Innovation and Entrepreneurship in Africa," Policy Research Working Paper Series 9945, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Houngbonon, Georges Vivien & Jeanjean, François, 2016. "What level of competition intensity maximises investment in the wireless industry?," Telecommunications Policy, Elsevier, vol. 40(8), pages 774-790.
    2. Briglauer, Wolfgang, 2014. "The impact of regulation and competition on the migration from old to new communications infrastructure: Recent evidence from EU27 member states," ZEW Discussion Papers 14-085, ZEW - Leibniz Centre for European Economic Research.
    3. Fernando Mayoral & Carlos Garcimartín, 2013. "The impact of population on the reduction of steady-state disparities across Spanish regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 49-69, February.
    4. Martin Andersson & Hans Lööf, 2009. "Learning‐by‐Exporting Revisited: The Role of Intensity and Persistence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 893-916, December.
    5. Abdelraouf, Nadine & Noureldin, Diaa, 2022. "The impact of the exchange rate regime on the dispersion of the price-change distribution: Evidence from a large panel of countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    6. Jaanika Merikull & Tairi Room, "undated". "Are foreign-owned firms different ? Comparision of employment volatility and elasticity of labour demand," Bank of Estonia Working Papers wp2014-1, Bank of Estonia.
    7. Schneider, Sophie Therese, 2018. "North-South trade agreements and the quality of institutions: Panel data evidence," Hohenheim Discussion Papers in Business, Economics and Social Sciences 27-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    8. Monica Schuster & Miet Maertens, 2013. "8 Private Food Standards and Firm-Level Trade Effects: A Dynamic Analysis of the Peruvian Asparagus Export Sector," Frontiers of Economics and Globalization, in: Nontariff Measures with Market Imperfections: Trade and Welfare Implications, pages 187-213, Emerald Group Publishing Limited.
    9. Johanna Vogel, 2012. "Agglomeration and Growth: Evidence from the Regions of Central and Eastern Europe," ERSA conference papers ersa12p1089, European Regional Science Association.
    10. Gharehgozli, Orkideh, 2021. "An empirical comparison between a regression framework and the Synthetic Control Method," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 70-81.
    11. Mateo Zokalj, 2016. "The impact of population aging on public finance in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 40(4), pages 383-412.
    12. Juan Federico & Joan-Lluis Capelleras, 2015. "The heterogeneous dynamics between growth and profits: the case of young firms," Small Business Economics, Springer, vol. 44(2), pages 231-253, February.
    13. Jan F. Kiviet, 2005. "Judging Contending Estimators by Simulation: Tournaments in Dynamic Panel Data Models," Tinbergen Institute Discussion Papers 05-112/4, Tinbergen Institute.
    14. Ismail M. Cole, 2023. "The political economy triangle of government spending, interest‐group influence, and income inequality: Evidence and implications from the US states," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 1122-1176, November.
    15. Charles Mawusi, 2021. "Economic Uncertainty and Remittances to Developing Economies: A System GMM Approach," Working Papers hal-03147813, HAL.
    16. Vogel, Johanna, 2013. "Regional Convergence in Europe: A Dynamic Heterogeneous Panel Approach," MPRA Paper 51794, University Library of Munich, Germany.
    17. Hujer Reinhard & Rodrigues Paulo J. M. & Wolf Katja, 2008. "Dynamic Panel Data Models with Spatial Correlation," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 612-629, October.
    18. Grundmann, Rainer & Gries, Thomas, 2015. "Crucial for Modern Sector Development? The Role of Exports and Institutions in Developing Countries," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112962, Verein für Socialpolitik / German Economic Association.
    19. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    20. Seidu, Ayuba & Onel, Gulcan & Moss, Charles Britt, 2018. "Impact of International Remittance on Out-Farm Labor Migration in Developing Countries: A Dynamic Panel Data Analysis," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266531, Southern Agricultural Economics Association.

    More about this item

    Keywords

    Market structure; 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:iepoli:v:38:y:2017:i:c:p:12-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505549 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.