Wednesday, July 11, 2007
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.