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Entry, standards and competition : firm strategies and the diffusion of mobile telephony

  • Heli Koski
  • Tobias Kretschmer

This paper studies the effects of a country’s regulatory setting and competitive environment on the performance of second-generation (2G) mobile telecommunication. We consider three dimensions of sector performance: entry time, service prices and diffusion. We address the question of non-random selection arising from cross-country differences in the timing of the commercialization of new technologies. Our empirical exploration shows that this type of sample selection may indeed be a substantial problem in cross-country studies on technology diffusion and yield biased estimates of the policy variables of interest. Our estimation results suggest that standardization accelerates 2G entry and diffusion, although within-standards competition triggers less aggressive price competition than between-standards competition. We also find that an early monopolist will price more aggressively to build up an installed base. Furthermore, we find that liberalizing markets for incumbent technologies (i.e. fixed line telephony) has accelerated the commercialization of 2G.

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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 801.

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Date of creation: Feb 2005
Date of revision:
Publication status: Published in Review of Industrial Organization, February, 2005, 26(1), pp. 89-113. ISSN: 1573-7160
Handle: RePEc:ehl:lserod:801
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  8. Philip M. Parker & Lars-Hendrik Roller, 1997. "Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 304-322, Summer.
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  10. Heli Koski, 1999. "The Installed Base Effect: Some Empirical Evidence From The Microcomputer Market," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(4), pages 273-310.
  11. Pindyck, Robert, 1989. "Irreversibility, uncertainty, and investment," Policy Research Working Paper Series 294, The World Bank.
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  13. James E. Prieger, 2003. "The Timing of Product Innovation and Regulatory Delay," Working Papers 19, University of California, Davis, Department of Economics.
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  15. Massoud Karshenas & Paul L. Stoneman, 1993. "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 503-528, Winter.
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