Friday, December 28, 2012
Posted by D. Daniel Sokol
Johannes Muck (Dusseldorf Institute for Competition Economics) and Ulrich Heimeshoff (Dusseldorf Institute for Competition Economics) discuss First mover advantages in mobile telecommunications: Evidence from OECD countries.
ABSTRACT: We explore the existence of first mover advantages in mobile telecommunications markets. Building on a data set comprising monthly penetration rates, market concentration, number of active operators, and market shares of 90 followers from 33 OECD countries, we estimate a dynamic growth model. Our analysis delivers five key results. Regarding a follower's longrun market share, we observe that (1) the penetration rate at the time of market entry exerts an inverted u-shaped effect, suggesting the existence of an optimal time for issuing additional licenses for mobile network operation; (2) the concentration rate at market entry exerts a positive effect, implying that it is easier for followers to enter a more concentrated market; (3) both the number of active operators at market entry and the number of currently active operators have a negative impact. Furthermore, we find that a follower's rate of convergence to the long-r! un market share is (4) negatively influenced by the current market concentration and number of active operators; (5) negatively affected by changes in the penetration rate since market entry, which strongly indicates the presence of substantial first mover advantages for pioneering network operators.