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Competition vs. Regulation in Mobile Telecommunications

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Abstract

This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome may prevail independently of market concentration when access prices are determined in bilateral negotiations. A lighthanded regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability.

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  • Johan Stennek & Thomas Tangeras, 2008. "Competition vs. Regulation in Mobile Telecommunications," Working Papers 08-09, NET Institute.
    • Handle: RePEc:net:wpaper:0809
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    1. Doh‐Shin Jeon & Sjaak Hurkens, 2008. "A retail benchmarking approach to efficient two‐way access pricing: no termination‐based price discrimination†," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 822-849, September.
    2. Johan Stennek & Thomas TangerŒs, 2008. "Intense Network Competition," Working Papers 08-36, NET Institute, revised Sep 2008.

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    More about this item

    Keywords

    network competition; two-way access; mobile termination rates; entry; collusion;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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