Investment and market power in mobile mergers
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The welfare effects of mergers in the mobile industry is the topic of an ongoing debate, however, there is still a lack of empirical evidence about the effect on consumer surplus. In this paper, we provide a simple structural model that accounts for investment in order to investigate the effect of mergers on consumer surplus in the mobile industry. Using a Cournot model with investment in cost-reducing technologies, and data on mobile Internet traffic from 18 European markets, we find that consumer surplus is maximized in markets with 3 symmetric operators. This finding accords well with a rising price per user and investment as a result of a merger. It suggests that, in mobile mergers, except 3-2 merger, dynamic efficiencies from investment outweigh static efficiencies from market power.
KeywordsMarket structure Merger Mobile telecommunications
JEL ClassificationD21 D22 L13 L40
A previous version of this paper was presented at the 27th European Regional Conference of the International Telecommunications Society in Cambridge (UK) in September 2016 and the International Industrial Organization Conference in Boston (US) April 2017. The authors are grateful to the participants and two anonymous referees for their comments and suggestions. The usual disclaimer applies.
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