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Market Structure and Investment in the Mobile Industry

Author

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  • François Jeanjean

    (Orange Labs - Orange Labs [Belfort] - France Télécom)

  • Georges Vivien Houngbonon

    (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)

Abstract

The impact of market structure, that is the number of firms and asymmetry , on investment is an important topic in the mobile industry. However, previous literature remains ambiguous about the direction of the relationship. This paper provides an empirical evidence of the impact of market structure on investment in the European mobile industry. The empirical assessment is based on a Salop model with vertical differentiation. Consistently with the prediction of this model, we find that both the number of operators and market share asymmetry have significant effects on investment. In symmetric markets, investment per operator falls with the number of operators, with larger effects for operators that lose market share more than the average. The industry investment rises with the number of operators in the short run, but eventually falls in the long run due to significant adjustment costs of investment in the mobile industry. These findings suggest that investment should be taken into account when analysing the welfare effects of market structure in the mobile industry.

Suggested Citation

  • François Jeanjean & Georges Vivien Houngbonon, 2017. "Market Structure and Investment in the Mobile Industry," Post-Print hal-01653812, HAL.
    • Handle: RePEc:hal:journl:hal-01653812
    DOI: 10.1016/j.infoecopol.2016.12.002
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    Cited by:

    1. François Jeanjean, 2021. "Impact of Technical Progress on the Relationship Between Competition and Investment," Journal of Industry, Competition and Trade, Springer, vol. 21(1), pages 81-101, March.
    2. Aimene, Louise & Guiffard, Jean-Baptiste & Ivaldi, Marc & Liang, Julienne, 2023. "Welfare Cost of Mobile Spectrum (Mis)allocation," CEPR Discussion Papers 18016, C.E.P.R. Discussion Papers.
    3. Liang Wang & Qiming Sun, 2022. "Market Competition, Infrastructure Sharing, and Network Investment in China’s Mobile Telecommunications Industry," Sustainability, MDPI, vol. 14(6), pages 1-17, March.
    4. Bayrak, Tuncay, 2018. "Evaluating large-scale IT investment decisions," Technology in Society, Elsevier, vol. 54(C), pages 128-138.
    5. Guo, Wen-Chung & Lai, Fu-Chuan, 2024. "R&D investments and location choices with three firms," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1448-1459.
    6. Lefouili, Yassine & Madio, Leonardo, 2023. "Market Structure and Investments : A Progress Report," TSE Working Papers 23-1491, Toulouse School of Economics (TSE), revised Sep 2024.
    7. Lefouili, Yassine & Madio, Leonardo, 2025. "Mergers and Investments: Where Do We Stand?," TSE Working Papers 25-1617, Toulouse School of Economics (TSE).
    8. Bahia, Kalvin & Castells, Pau, 2022. "The dynamic effects of competition on investment: the case of the European mobile communications industry," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265614, International Telecommunications Society (ITS).
    9. Aimene, Louise & Jeanjean, François & Liang, Julienne, 2021. "Impact of mobile operator consolidation on unit prices," Telecommunications Policy, Elsevier, vol. 45(4).
    10. Polemis, Michael & Tselekounis, Markos, 2019. "Does deregulation drive innovation intensity? Lessons learned from the OECD telecommunications sector," MPRA Paper 92770, University Library of Munich, Germany.
    11. Houngbonon, Georges Vivien & Ivaldi, Marc & Palikot, Emil & Strusani, Davide, 2023. "The Impact of Shared Telecom Infrastructure on Digital Connectivity and Inclusion," TSE Working Papers 23-1427, Toulouse School of Economics (TSE), revised Aug 2025.
    12. Jeanjean, François & Liang, Julienne, 2023. "Market structure and performance in mobile markets. The example of Europe," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 277979, International Telecommunications Society (ITS).
    13. Padmashree Gehl Sampath & Walter Park, 2019. "Do Patents Lead to Market Concentration and Excess Profits?," GDAE Working Papers 19-02, GDAE, Tufts University.
    14. Jeanjean, François & Houngbonon, Georges Vivien, 2016. "Optimal Market Structure in the Mobile Industry," 27th European Regional ITS Conference, Cambridge (UK) 2016 148678, International Telecommunications Society (ITS).
    15. Wellmann, Nicolas, 2019. "Hello . . . Are You Still There? An Empirical Analysis How Market Structure Affects Quality of Mobile Networks," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203579, Verein für Socialpolitik / German Economic Association.
    16. Georges V. Houngbonon & Francois Jeanjean, 2019. "Investment and market power in mobile mergers," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 65-81, March.
    17. Brito, Duarte & Vasconcelos, Helder, 2023. "Competitive effects of mergers and of spectrum divestment remedies in mobile telecommunication markets," Telecommunications Policy, Elsevier, vol. 47(10).
    18. Houngbonon, Georges V. & Ivaldi, Marc & Palikot, Emil & Strusani, Davide, 2023. "The Impact of Shared Telecom Infrastructure on Digital Connectivity and Inclusion," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 277970, International Telecommunications Society (ITS).
    19. Houngbonon,Georges Vivien & Mensah,Justice Tei & Traore,Nouhoum-000531164, 2022. "The Impact of Internet Access on Innovation and Entrepreneurship in Africa," Policy Research Working Paper Series 9945, The World Bank.

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    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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