Mobile only users powered by fixed-mobile substitution
In a context of partial �fixed-mobile substitution, we analyze �fixed-mobile bundling and mobile-to-�fixed off-loading in a duopoly model in which consumers buy one or two products. A joint purchase discount mitigates �fixed-mobile substitutability and consequently reduces mobile-only and fixed-only consumers. Practises like introducing a small discount, applied on a bundle of multiple service or mobile-to-�fixed off�loading by both operators are analysed. We �nd that such practises do not have negative impacts on the profi�ts of whole market and lead to both consumers' surplus and welfare gains. The investment incentives in �xed network are positive and can be boosted by FM bundling without considering regulatory intervention and before taking into account of �fixed costs. The investment incentives in mobile network are more likely a situation of prisoners' dilemma where operators should invest as long as there are mobile-only consumers.
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