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Screening competition in mobile telephony†

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  • Lukasz Grzybowski

Abstract

This article presents a simple method for screening competition in differentiated products oligopoly with a small number of competitors. In many situations, estimation of price elasticities of demand may be impossible due to difficulties in defining demand or missing data on sales. However, even without information on price elasticities, in certain situations it is possible to test for the static noncooperative Nash-Bertrand equilibrium, which in the case of rejection, may be important screening information for antitrust authorities. The static noncooperative Nash-Bertrand equilibrium may be rejected when demand is linear and in the estimation of best-response functions, the coefficients on the competitors' prices are statistically greater than 0.5. The application of this method is illustrated by the example of German mobile telephony using monthly data between January 1998 and December 2002. According to the estimation results, the observed prices in the segment of low-users cannot be the outcome of a static noncooperative Nash-Bertrand equilibrium.

Suggested Citation

  • Lukasz Grzybowski, 2011. "Screening competition in mobile telephony†," Applied Economics, Taylor & Francis Journals, vol. 43(17), pages 2155-2163.
  • Handle: RePEc:taf:applec:v:43:y:2011:i:17:p:2155-2163
    DOI: 10.1080/00036840903153788
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    References listed on IDEAS

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    1. Pierre A. Buigues & Patrick Rey (ed.), 2004. "The Economics of Antitrust and Regulation in Telecommunications," Books, Edward Elgar Publishing, number 3208.
    2. Jiyoung Kim, 2006. "A Structural Analysis for Consumer's Dynamic Switching Decision in the Cellular Service Industry," Working Papers 06-24, NET Institute, revised Oct 2006.
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