Is the French mobile phone cartel really a cartel?
France Telecom (FT), SFR and Bouygues Telecom (BT) have been fined by France's Conseil de la Concurrence (CC) for organizing a mobile phone cartel with stable market shares (one-half, one-third and one-sixth, respectively) and for directly exchanging commercial information. While not contesting the legal decision, it is argued here that the economic reasoning is flawed. (1) As the CC made much of the firms' stable market shares, we have first followed this line of reasoning by considering that the market shares are quotas under uniform costs. Even if there is a general incentive to form a monopolistic cartel, BT was too small for it to be worth its while to join it; it is not necessary to exchange information directly to coordinate market shares and prices effectively; all partial cartels are unlikely. (2) We then departed from the CC by considering that the non-uniform market shares are explained by the costs in Cournot competition: this allows costs to be deduced from the observed market shares by assuming that they are kept the same when switching from Cournot competition to any form of cartel. We deduced that market shares cannot be other than stable and non-uniform; any monopoly is unlikely to come about, because FT has negative incentives to form a monopolistic cartel; no partial cartels of two operators are viable because at least one member would lose out. The paper also shows that Stackelberg competition is unlikely as well as Bertrand-Edgeworth competition. In conclusion, Cournot competition is the only arrangement that guarantees no losses to all operators.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-27, June.
- Paul Belleflamme & Francis Bloch, 2004.
"Market sharing agreements and collusive networks,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 387-411, 05.
- ELLEFLAMME, Paul & BLOCH, Francis, . "Market sharing agreements and collusive networks," CORE Discussion Papers RP -1711, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Paul Belleflamme & Francis Bloch, 2001. "Market Sharing Agreements and Collusive Networks," Working Papers 443, Queen Mary University of London, School of Economics and Finance.
- Cave, Jonathan & Salant, Stephen W, 1995.
"Cartel Quotas under Majority Rule,"
American Economic Review,
American Economic Association, vol. 85(1), pages 82-102, March.
- Mora R. Jhon James, 2006. "Cournot's model applied to cellphone service in Colombia, 1995-2001," Journal of Economic Studies, Emerald Group Publishing, vol. 33(6), pages 469-477, November.
- Mills, David E & Elzinga, Kenneth G, 1978. "Cartel Problems: Comment," American Economic Review, American Economic Association, vol. 68(5), pages 938-41, December.
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
- repec:ner:tilbur:urn:nbn:nl:ui:12-117032 is not listed on IDEAS
- Arnold Heertje, 1996. "On Stackelberg’s oligopoly theory," Journal of Economic Studies, Emerald Group Publishing, vol. 23(5/6), pages 48-57, October.
- Bloch, Francis, 2002. "Coalitions and Networks in Industrial Organization," Manchester School, University of Manchester, vol. 70(1), pages 36-55, January.
- Groot, A.M. & Withagen, C.A.A.M. & de Zeeuw, A.J., 1996.
"Strong Time-Consistency in the Cartel-versus-Fringe Model,"
1996-22, Tilburg University, Center for Economic Research.
- Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 2003. "Strong time-consistency in the cartel-versus-fringe model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 287-306, November.
- Groot, F. & Withagen, C.A.A.M. & de Zeeuw, A.J., 2003. "Strong time-consistency in the cartel-versus-fringe model," Other publications TiSEM 5ba46a2e-d763-4a8c-939b-3, School of Economics and Management.
- Robert Porter, 2005. "Detecting Collusion," Review of Industrial Organization, Springer, vol. 26(2), pages 147-167, December.
- Eckert, Andrew & West, Douglas S, 2004. "Retail Gasoline Price Cycles across Spatially Dispersed Gasoline Stations," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 245-73, April.
- Cricelli, Livio & Gastaldi, Massimo & Levialdi, Nathan, 2001. "Strategic behaviours in international telecommunications system," International Journal of Production Economics, Elsevier, vol. 69(2), pages 141-149, January.
- Harrington, Joseph Jr., 1989. "Collusion among asymmetric firms: The case of different discount factors," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 289-307, June.
- Osborne, Dale K, 1976. "Cartel Problems," American Economic Review, American Economic Association, vol. 66(5), pages 835-44, December.
- Buccirossi Paolo, 2006. "Does Parallel Behavior Provide Some Evidence of Collusion?," Review of Law & Economics, De Gruyter, vol. 2(1), pages 85-102, July.
- Gastaldi, Massimo & Levialdi, Nathan, 1998. "Strategic planning for long-distance telecommunications: A symbiotic production system," International Journal of Production Economics, Elsevier, vol. 56(1), pages 179-189, September.
- Osborne, D K, 1978. "Cartel Problems: Reply," American Economic Review, American Economic Association, vol. 68(5), pages 947-49, December.
- Dai, Yue & Chao, Xiuli & Fang, Shu-Cherng & Nuttle, Henry L.W., 2005. "Pricing in revenue management for multiple firms competing for customers," International Journal of Production Economics, Elsevier, vol. 98(1), pages 1-16, October.
- Tsai, Hsiang-Chih & Chen, Chun-Mei & Tzeng, Gwo-Hshiung, 2006. "The comparative productivity efficiency for global telecoms," International Journal of Production Economics, Elsevier, vol. 103(2), pages 509-526, October.
- Christodoulopoulos, Th., 1995. "Telecommunications in Greece: A study of production structure and natural monopoly issue," International Journal of Production Economics, Elsevier, vol. 38(2-3), pages 147-157, March.
- Stigler, George J., 1983. "The Organization of Industry," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226774329.
- Holahan, William L, 1978. "Cartel Problems: Comment," American Economic Review, American Economic Association, vol. 68(5), pages 942-46, December.
- Gallo, Paolo & Luciano, Elisa & Peccati, Lorenzo, 1997. "Revision of industrial supply conditions and game theory," International Journal of Production Economics, Elsevier, vol. 49(1), pages 17-28, March.
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:122:y:2009:i:2:p:663-677. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.