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Competition and Quality: Evidence from the Entry of Mobile Network Service

Author

Listed:
  • Marc Bourreau

    (Telecom Paris, Department of Economics and Social Sciences, 19 place Marguerite Perey, 91120 Palaiseau, France)

  • Yutec Sun

    (CREST-ENSAI, 51 Rue Blaise Pascal, 35170 Bruz, France)

Abstract
We measure the impact of a new entry on quality supply and welfare in the French mobile service market, where the service providers compete on investing in network resources to meet fast-growing demand for mobile consumption. As network's quality is endogenous to strategic investments, it is unclear whether the entry led the market closer to the socially optimal level of quality supply and welfare. We develop a tractable approach to empirically analyze the dynamic oligopoly game of investment in the network resources in the market where consumers face substantial costs of switching among differentiated services. The counterfactual analysis finds that the quality may be oversupplied in oligopoly competition from the social welfare perspective, while the merger is predicted to yield undersupplied quality.

Suggested Citation

  • Marc Bourreau & Yutec Sun, 2022. "Competition and Quality: Evidence from the Entry of Mobile Network Service," Working Papers 22-04, NET Institute.
    • Handle: RePEc:net:wpaper:2204
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    File URL: http://www.netinst.org/Sun_22-04.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    entry; quality; competition; investment; innovation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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