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Does one more or one less mobile operator affect prices? A comprehensive ex-post evaluation of entries and mergers in European mobile telecommunication markets

Author

Listed:
  • Gergely Csorba

    () (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)

  • Zoltan Papai

    () (Infrapont Economic Consulting)

Abstract

This paper estimates the impact of entries and mergers on the price of mobile voice services in a panel database of 27 European Member States between 2003 and 2010. Our difference-in-differences econometric methodology exploits the variance in different structural changes between countries to separate the respective effects. Our results show that the effect of entry crucially depends on the number of active operators and the type of entrant, and not controlling for these differences might lead to misleading conclusions. We find no robust evidence that entry has a price-decreasing effect on markets with originally 2 operators. However, the entry of a 4th operator does have a price-decreasing effect, but with different dynamics concerning the entrant's type. When we separate entry effects for the subsequent years, we show that the significant price-decreasing effects for local operators entering occur only in the first year after entry, while the price-decreasing effects for multinational entries are significantly larger on the long-run. Last, we find no price-increasing effects of 5-to-4 mergers, but a long run price-increasing effect of a 4-to-3 merger.

Suggested Citation

  • Gergely Csorba & Zoltan Papai, 2015. "Does one more or one less mobile operator affect prices? A comprehensive ex-post evaluation of entries and mergers in European mobile telecommunication markets," IEHAS Discussion Papers 1541, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1541
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    File URL: http://econ.core.hu/file/download/mtdp/MTDP1541.pdf
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    References listed on IDEAS

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    1. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    2. Philippe Choné & Laurent Linnemer, 2012. "A Treatment Effect Method for Merger Analysis with an Application to Parking Prices in P aris," Journal of Industrial Economics, Wiley Blackwell, vol. 60(4), pages 631-656, December.
    3. Leemore Dafny, 2009. "Estimation and Identification of Merger Effects: An Application to Hospital Mergers," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 523-550, August.
    4. Li, Yan & Lyons, Bruce, 2012. "Market structure, regulation and the speed of mobile network penetration," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 697-707.
    5. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    7. Gruber,Harald, 2005. "The Economics of Mobile Telecommunications," Cambridge Books, Cambridge University Press, number 9780521843270.
    8. Justine S. Hastings, 2004. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California," American Economic Review, American Economic Association, vol. 94(1), pages 317-328, March.
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    Cited by:

    1. Michał Grajek & Klaus Gugler & Tobias Kretschmer & Ion Mişcişin, 2017. "Static or dynamic efficiency: Horizontal merger effects in the wireless telecommunications industry," ESMT Research Working Papers ESMT-17-04, ESMT European School of Management and Technology.

    More about this item

    Keywords

    ex-post evaluation; mobile telecommunications; entry; merger; difference-in-differences estimations;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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