Working Paper: CEPR ID: DP2440
Authors: Harald Gruber; Frank Verboven
Abstract: We analyse the effects of government policies, such as entry regulation and standard setting, on the evolution of an industry, the global mobile telecommunications markets during 1981-1997. Among other results, we find that countries that issue first licenses at later dates converge rather slowly and only partially, compared to early-moving countries. We find that introducing competition has a strong immediate impact on the diffusion rate, but a rather weak impact afterwards. Sequential entry is preceded by pre-emptive behaviour. These findings are consistent with the presence of consumer switching costs. Concerning standards, we find that setting a standard has a significant positive impact on diffusion for the analogue technology, but not for the digital technology. This suggests that the network advantages from having a single standard are offset by the benefits derived from the battle for developing more efficient digital systems.
Keywords: technology diffusion; entry regulation; standards and competing systems; capacity constraints; consumer switching costs; network externalities; preemption; mobile telecommunications
JEL Codes: L10; L86; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| timing of first entry (C41) | diffusion of mobile services (L96) |
| timing of first entry (C41) | convergence of late movers (F12) |
| introduction of a second entrant (L13) | diffusion of mobile services (L96) |
| competition (L13) | diffusion of mobile services (L96) |
| simultaneous entry (C30) | diffusion speed (C69) |
| sequential entry (C69) | diffusion speed (C69) |
| setting a technological standard (O30) | diffusion of analogue technology (O33) |
| setting a technological standard (O30) | diffusion during digital phase (C69) |