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More firms, more competition? The case of the fourth operator in France's mobile phone market

Listed author(s):
  • Louis De Mesnard

    ()

    (LEG - Laboratoire d'Economie et de Gestion - CNRS - UB - Université de Bourgogne)

To foster competition the French government authorized a fourth operator, ‘Free', to enter the country's mobile phone market at the end of 2009 alongside Orange, SFR and Bouygues Telecom (BT), who held respectively one-half, one-third and one-sixth of the market. By using a stylized model of France's phone market, we have examined what we call the regulator's nightmares and dreams. If Cournot competition is in place before Free's entry, minimizing the total profit fails to maximize the consumer surplus and the total surplus; the maximum most realistic price fall is 6.7% compared to three-way competition and could be 1.7% only; if Orange, SFR and Bouygues Telecom extend competition to Free, this situation will be sustainable. If Orange, SFR and Bouygues Telecom are in monopolistic cartel, an extension to a monopolistic cartel of four or a switching to four-way Cournot competition are equally unlikely; Orange, SFR and Bouygues Telecom can only place Free in their competitive fringe, which is not so bad for the regulator; however, Orange's incentives will push to four-way competition if Free is poorly competitive.

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Paper provided by HAL in its series Post-Print with number hal-00546876.

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Date of creation: 13 Dec 2010
Publication status: Published in International Journal of Production Economics, Elsevier, 2010, DOI: 10.1016/j.ijpe.2010.12.011
Handle: RePEc:hal:journl:hal-00546876
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00546876
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