Market Structure, Investment, and Technical Efficiencies in Mobile Telecommunications
with Georges V. Houngbonon, Marc Ivaldi, and Paul T. Scott
Revise & Resubmit, Journal of Political Economy
Draft | Abstract | Slides | Code
We develop a model of competition in prices and infrastructure among mobile network operators. Consolidation can increase market power, but economies of scale, which we derive from physical principles, lead to more efficient data transmission. Estimating our model with French consumer and infrastructure data, we find that while prices decrease with more firms, so do download speeds. Consumer surplus is maximized at seven firms, but fewer firms would improve total surplus and welfare for high-income consumers. Wealso use our framework to assess the impact of another aspect of market structure: the allocation of spectrum.