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Market entry and roll-out with product differentiation


  • Tzavara, Dionisia

    (University of Surrey)

  • Paul Levine

    (University of Surrey, LBS and CEPR)

  • Neil Rickman


This paper examines a general problem exemplified by post-auction (third generation---`3G') mobile telecommunications markets. When entering these (or any other) markets, firms must often decide on the degree of coverage (`roll-out') they wish to achieve. Prior investment must be sunk in order to achieve the desired (or mandated) coverage level. We study the private and social incentives of a would-be entrant into a market with horizontal product differentiation when choosing its level of roll-out. The endogenous extent of entry influences downstream retail prices; Bertrand or local monopoly pricing or a mixed strategy equilibrium may emerge. Importantly, entry may involve too much or too little roll-out from a social perspective, thus suggesting that regulatory intervention may be appropriate to achieve desired levels of competition in such settings.

Suggested Citation

  • Tzavara, Dionisia & Paul Levine & Neil Rickman, 2002. "Market entry and roll-out with product differentiation," Royal Economic Society Annual Conference 2002 176, Royal Economic Society.
  • Handle: RePEc:ecj:ac2002:176

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    References listed on IDEAS

    1. Robin Mason & Helen Weeds, 2000. "Networks, Options and Preemption," Econometric Society World Congress 2000 Contributed Papers 1721, Econometric Society.
    2. H. Cremer & F. Gasmi & A. Grimaud & J. J. Laffont, 2001. "Universal Service: An economic perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 72(1), pages 5-43, March.
    3. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    4. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-564, May.
    5. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(1), pages 1-25, February.
    6. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    7. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, March.
    8. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-190, March.
    9. Gans, Joshua S & Williams, Philip L, 1999. "Access Regulation and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 75(229), pages 127-137, June.
    10. Mason, R. & Weeds, H., 2000. "Networks, options and preemptions," Discussion Paper Series In Economics And Econometrics 0013, Economics Division, School of Social Sciences, University of Southampton.
    11. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826, June.
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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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