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Endogenous Sunk Costs in the Market for Mobile Telecommunications - The Role of Licence Fees

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  • Harald Gruber

    (European Investment Bank)

Abstract

An oligopoly model with endogenous sunk costs illustrates the trade off between ex ante extraction of oligopoly rents and market entry of firms in the mobile telecommunications industry. Competitive bidding for radio frequency licences provides scope for setting market structure endogenously - the higher the licence fee, the lower the number of competitive firms sustained by the market. High licence fees may be a signal for post-entry collusion.

Suggested Citation

  • Harald Gruber, 2002. "Endogenous Sunk Costs in the Market for Mobile Telecommunications - The Role of Licence Fees," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 55-64.
  • Handle: RePEc:eso:journl:v:33:y:2002:i:1:p:55-64
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    File URL: http://www.esr.ie/Vol33_1Gruber.pdf
    File Function: First version, 2002
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    References listed on IDEAS

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    1. Gruber, Harald & Verboven, Frank, 2001. "The evolution of markets under entry and standards regulation -- the case of global mobile telecommunications," International Journal of Industrial Organization, Elsevier, pages 1189-1212.
    2. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, pages 1-4.
    3. Gruber, Harald, 1999. "An investment view of mobile telecommunications in the European Union," Telecommunications Policy, Elsevier, pages 521-538.
    4. Gruber, Harald & Verboven, Frank, 2001. "The evolution of markets under entry and standards regulation -- the case of global mobile telecommunications," International Journal of Industrial Organization, Elsevier, pages 1189-1212.
    5. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, pages 169-189.
    6. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, pages 169-189.
    7. Theo Offerman & Jan Potters, 2000. "Does Auctioning of Entry Licenses affect Consumer Prices? An Experimental Study," Tinbergen Institute Discussion Papers 00-046/1, Tinbergen Institute.
    8. John McMillan, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, pages 145-162.
    9. Peter Cramton, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Papers of Peter Cramton 95jems, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
    10. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Erik Bohlin & Gary Madden & Aaron Morey, 2010. "An Econometric Analysis of 3G Auction Spectrum Valuations," RSCAS Working Papers 2010/55, European University Institute.
    2. repec:spr:infosf:v:10:y:2008:i:1:d:10.1007_s10796-007-9056-1 is not listed on IDEAS
    3. Gary Madden & Erik Bohlin & Paitoon Kraipornsak & Thien Tran, 2014. "The determinants of prices in the FCC's 700 MHz spectrum auction," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 1953-1960, June.

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