Entry under Subsidy: the Competitive U.S. Local Telephone Industry
The 1996 Telecommunication Act introduces entry into an originally monopolistic U.S. local telephone industry. As competitors cherry pick rich, urban markets to enter, the Act calls for an explicit and pro-competitive subsidy policy to narrow the potential divide in telecom infrastructure. To study relevant economic factors in the design of such a policy, we estimate a dynamic oligopoly entry game using data on the competitors' entry decisions into local markets. As we observe the identities of potential entrants and their waiting time before actual entry, we allow these firms to be heterogeneous long-run players who have the option value of waiting. We find that both market- and firm-level heterogeneity plays an important role in a potential entrant's local entry decisions. Moreover, these entry decisions are significantly influenced by the consideration of both current and future competition. Using structural estimates, we evaluate the effectiveness of different subsidy policies.
|Date of creation:||2012|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Nicholas Economides & Katja Seim & V. Brian Viard, 2008.
"Quantifying the benefits of entry into local phone service,"
RAND Journal of Economics,
RAND Corporation, vol. 39(3), pages 699-730.
- Nicholas Economides & V. Brian Viard & Katja Seim, 2005. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 05-08, NET Institute, revised Nov 2005.
- Nicholas Economides & Katja Seim & V. Brian Viard, 2007. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 07-27, New York University, Leonard N. Stern School of Business, Department of Economics.
- Nicholas Economides & V. Brian Viard & Katja Seim, 2007. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 07-38, NET Institute, revised Oct 2007.
- Nicholas Economides & V. Brian Viard & Katja Seim, 2007. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 07-48, NET Institute, revised Dec 2007.
- Nicholas Economides & Katja Seim & V. Brian Viard, 2005. "Quantifying the Benefits of Entry into Local Phone Service," Working Papers 05-17, New York University, Leonard N. Stern School of Business, Department of Economics.
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