Working Paper: CEPR ID: DP6073
Authors: Johan Stennek; Thomas P. Tangers
Abstract: This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed 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.
Keywords: access price; competition; entry; network competition; network substitutability; regulation; two-way access
JEL Codes: L51; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| light-handed regulatory policy (G18) | effective competition (L13) |
| effective competition (L13) | call prices close to marginal costs (D41) |
| light-handed regulatory policy (G18) | call prices close to marginal costs (D41) |
| demand elasticity (D12) | call price equilibrium (D41) |