Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 685: Competition vs. Regulation in Mobile Telecommunications

Johan Stennek () and Thomas Tangerås ()
Additional contact information
Johan Stennek: Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Thomas Tangerås: Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

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: Network Competition; Two-way Access; Access Price Competition; Entry; Regulation; Network Substitutability

JEL-codes: L51; L96

50 pages, December 20, 2006

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