July 11, 2007
Antitrust vs. Sector Regulation in Mobile Telecom
Posted by D. Daniel Sokol
Johan Stennek and Thomas Tangeraas of the Research Institute of Industrial Economics in Stockholm have authored a study that address the issue of antitrust vs. sector regulation titled Competition vs. Regulation in Mobile Telecommunications.
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.
July 11, 2007 | Permalink
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