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Can evidence of pricing power help market power assessment? Broadband Internet in Ireland and the Netherlands

Listed author(s):
  • Correa, Lisa
  • Crocioni, Pietro
Registered author(s):

    This article proposes a simple hedonic price test to assess whether firms may have pricing power. The test allows NRAs to compare prices of providers of differentiated products on a like-for-like basis. Testing for pricing power could be a useful complement to market share analysis. This is especially the case in market reviews periodically undertaken by European communications regulators. As an illustration the test was applied to broadband Internet access services in Ireland and the Netherlands. Results appear encouraging as they are broadly aligned to the decisions of the regulatory authorities in both countries that the incumbent DSL operators had market power at the time.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0308596111002072
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    Article provided by Elsevier in its journal Telecommunications Policy.

    Volume (Year): 36 (2012)
    Issue (Month): 5 ()
    Pages: 419-433

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    Handle: RePEc:eee:telpol:v:36:y:2012:i:5:p:419-433
    DOI: 10.1016/j.telpol.2011.11.014
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    1. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
    2. Brenkers, Randy & Verboven, Frank, 2005. "Market Definition with Differentiated Products - Lessons from the Car Market," CEPR Discussion Papers 5249, C.E.P.R. Discussion Papers.
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    4. Nerlove, Marc, 1995. "Hedonic price functions and the measurement of preferences: The case of Swedish wine consumers," European Economic Review, Elsevier, vol. 39(9), pages 1697-1716, December.
    5. Dewenter, Ralf & Haucap, Justus & Luther, Ricardo & Rötzel, Peter, 2007. "Hedonic prices in the German market for mobile phones," Telecommunications Policy, Elsevier, vol. 31(1), pages 4-13, February.
    6. Zhang, Wei & Boyle, Glenn & Howell, Bronwyn, 2008. "Catching-Up in Broadband Regressions: Does Local Loop Unbundling Policy Lead to Material Increases in OECD Broadband Uptake?," Working Paper Series 3991, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
    8. Distaso, Walter & Lupi, Paolo & Manenti, Fabio M., 2006. "Platform competition and broadband uptake: Theory and empirical evidence from the European union," Information Economics and Policy, Elsevier, vol. 18(1), pages 87-106, March.
    9. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
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