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Market Structure, Investment and Technical Efficiencies in Mobile Telecommunications

Author

Listed:
  • Ivaldi, Marc
  • Elliott, Jonathan
  • Houngbonon, Georges V.
  • Scott, Paul

Abstract

We develop a model of competition in prices and infrastructural investment among mobile network providers. Market shares and service quality (download speed) are simultaneously determined, for demand affects the network load just as delivered quality affects consumer demand. While consolidation typically has adverse impacts on consumer surplus, economies of scale (which we derive from physical principles) push in the other direction, and we find that consumer surplus is maximized at a moderate number of firms, and that the optimal number of firms is higher for lower income consumers. Our modeling framework allows us to quantify the marginal social value of allocating more spectrum to mobile telecommunications, finding it is roughly five times an individual firm’s willingness to pay for a marginal unit of spectrum.

Suggested Citation

  • Ivaldi, Marc & Elliott, Jonathan & Houngbonon, Georges V. & Scott, Paul, 2021. "Market Structure, Investment and Technical Efficiencies in Mobile Telecommunications," CEPR Discussion Papers 16111, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16111
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    References listed on IDEAS

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    1. Mulligan, James G, 1983. "The Economies of Massed Reserves," American Economic Review, American Economic Association, vol. 73(4), pages 725-734, September.
    2. Verboven, Frank & Bourreau, Marc & Sun, Yutec, 2018. "Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market," CEPR Discussion Papers 12866, C.E.P.R. Discussion Papers.
    3. Joseph Cullen & Nicolas Schutz & Oleksandr Shcherbakov, 2020. "Welfare Analysis of Equilibria With and Without Early Termination Fees in the US Wireless Industry," Staff Working Papers 20-9, Bank of Canada.
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    Cited by:

    1. Marcoux, Mathieu, 2022. "Strategic interactions in mobile network investment with a new entrant and unobserved heterogeneity," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    2. Marc Bourreau & Yutec Sun, 2022. "Competition and Quality: Evidence from the Entry of Mobile Network Service," Working Papers 22-04, NET Institute.

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    More about this item

    Keywords

    Mobile telecommunications; Market structure; Infrastructure; Scale efficiency; Antitrust policy; Endogenous quality; Queuing;
    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

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