Incentive to invest in improving the quality in telecommunication industry
This paper investigates the incentives to invest in improving the quality (as distinguished to investment in a new activity) in telecommunication industry using the empirical example of wireless markets. We highlight that investment incentives are positively related to the potential for technical progress. They also depend on market structure, competition intensity and penetration rate. We show that there is a target amount of investment for each national market that firms strive to achieve. We show that, from a social perspective, this target amount is the best amount that firms are encouraged to invest. Nonachievement of the target amount entails underinvestment, a fall in consumer surplus and welfare and may slow down technical progress. Employing a 30 countries dataset during 8 years, we have empirically found a change in investment behaviour according whether the target amount is achieved or not. A low margin per user may hamper the achievement of the target amount. As a result, the maximum consumer surplus as well as welfare occurs under imperfect competition and not under perfect competition.
|Date of creation:||2012|
|Contact details of provider:|| Web page: http://www.itseurope.org/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005.
"Competition and Innovation: an Inverted-U Relationship,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 120(2), pages 701-728.
- Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
- Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
- Philippe Aghion & Nicolas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
- Audretsch, David B. & Baumol, William J. & Burke, Andrew E., 2001. "Competition policy in dynamic markets," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 613-634, April.
- Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-293, June.
- Ariel Pakes & Mark Schankerman, 1984. "An Exploration into the Determinants of Research Intensity," NBER Chapters,in: R&D, Patents, and Productivity, pages 209-232 National Bureau of Economic Research, Inc.
- Pakes, Ariel & Schankerman, Mark, 1980. "An Exploration Into the Determinants of Research Intensity," Working Papers 80-02, C.V. Starr Center for Applied Economics, New York University.
- Ariel Pakes & Mark Schankerman, 1980. "An Exploration into the Determinants of Research Intensity," NBER Working Papers 0438, National Bureau of Economic Research, Inc.
- Yongmin Chen & Michael H. Riordan, 2007. "Price and Variety in the Spokes Model," Economic Journal, Royal Economic Society, vol. 117(522), pages 897-921, July.
- Kamien, Morton I & Schwartz, Nancy L, 1975. "Market Structure and Innovation: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(1), pages 1-37, March.
- Johannes Bauer & Erik Bohlin, 2008. "From Static to Dynamic Regulation," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(1), pages 38-50, January.
- Bouckaert, Jan & van Dijk, Theon & Verboven, Frank, 2010. "Access regulation, competition, and broadband penetration: An international study," Telecommunications Policy, Elsevier, vol. 34(11), pages 661-671, December.
- BOUCKAERT, Jan & VAN DIJK, Theon & VERBOVEN, Frank, 2010. "Access regulation, competition, and broadband penetration: An international study," Working Papers 2010020, University of Antwerp, Faculty of Applied Economics.
- Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
- Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Valletti, Tommaso M., 0. "The theory of access pricing and its linkage with investment incentives," Telecommunications Policy, Elsevier, vol. 27(10-11), pages 659-675, November.
- Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:zbw:itse12:60375. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.