Abstract We propose a model of Bertrand competition in which consumers choose firms based on prices and qualities. Service quality depends on congestion, which is a function of capacity and output. We first present theoretical properties of the model. Next, we calibrate the model to the wireless industry and use it to evaluate the impacts of changes in spectrum allocation on consumer welfare and profits. Simulations of the model show that when one firm acquires more spectrum, consumer welfare at all firms increases due to congestion externality effects. We find that a transfer of spectrum from one firm to another can either raise or lower consumer welfare at the firms not involved in the transaction, again due to externality effects. Where it is possible to compare the results of our model to the wireless industry, they are consistent with the data. We also explore some possible effects of the upcoming 2016 spectrum auctions.
{"title":"Effects of Spectrum Holdings on Equilibrium in the Wireless Industry","authors":"Jonathan R. Lhost, Brijesh P. Pinto, D. Sibley","doi":"10.2139/ssrn.2629039","DOIUrl":"https://doi.org/10.2139/ssrn.2629039","url":null,"abstract":"Abstract We propose a model of Bertrand competition in which consumers choose firms based on prices and qualities. Service quality depends on congestion, which is a function of capacity and output. We first present theoretical properties of the model. Next, we calibrate the model to the wireless industry and use it to evaluate the impacts of changes in spectrum allocation on consumer welfare and profits. Simulations of the model show that when one firm acquires more spectrum, consumer welfare at all firms increases due to congestion externality effects. We find that a transfer of spectrum from one firm to another can either raise or lower consumer welfare at the firms not involved in the transaction, again due to externality effects. Where it is possible to compare the results of our model to the wireless industry, they are consistent with the data. We also explore some possible effects of the upcoming 2016 spectrum auctions.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"23 1","pages":"111 - 155"},"PeriodicalIF":0.7,"publicationDate":"2015-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83549807","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract A substantial share of customers in emerging markets use dual-SIM phones and subscribe to two mobile networks. A primary motive for so called multi-simming is to take advantage of cheap on-net services from both networks. In our modelling effort, we augment the seminal model of competing telephone networks á la Laffont, Rey and Tirole (1998b) by a segment of flexible price hunters that may choose to multi-sim. According to our findings, in equilibrium, the networks set a high off-net price in the linear tariffs to achieve segmentation. This induces the price hunters to multi-sim. We show that increased deployment of dual-SIM phones may induce a mixing equilibrium with high expected on-net prices. Thus, somewhat paradoxically, deployment of a technology that increases substitutability, and thereby competition, may end up raising prices.
{"title":"Mobile Telephony in Emerging Markets: The Importance of Dual-SIM Phones","authors":"K. Andersson, D. Göller","doi":"10.2139/ssrn.2593722","DOIUrl":"https://doi.org/10.2139/ssrn.2593722","url":null,"abstract":"Abstract A substantial share of customers in emerging markets use dual-SIM phones and subscribe to two mobile networks. A primary motive for so called multi-simming is to take advantage of cheap on-net services from both networks. In our modelling effort, we augment the seminal model of competing telephone networks á la Laffont, Rey and Tirole (1998b) by a segment of flexible price hunters that may choose to multi-sim. According to our findings, in equilibrium, the networks set a high off-net price in the linear tariffs to achieve segmentation. This induces the price hunters to multi-sim. We show that increased deployment of dual-SIM phones may induce a mixing equilibrium with high expected on-net prices. Thus, somewhat paradoxically, deployment of a technology that increases substitutability, and thereby competition, may end up raising prices.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"38 1","pages":"189 - 219"},"PeriodicalIF":0.7,"publicationDate":"2015-04-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76978077","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Much of the literature on airline cooperation focuses on the price effects of cooperation. A key contribution of our paper is to empirically examine the product quality effects of airline cooperation. Two common types of cooperation among airlines involve international alliances and antitrust immunity (ATI), where ATI allows for more extensive cooperation. Additionally, this paper examines the extent to which domestic mergers affect the quality of international air travel products. The results suggest that increases in the membership of a carrier’s alliance or ATI partners and domestic mergers are associated with the carrier’s own products having more travel-convenient routing quality. Therefore, a complete welfare evaluation of airline cooperation and mergers should not ignore product quality effects.
{"title":"Product Quality Effects of International Airline Alliances, Antitrust Immunity, and Domestic Mergers","authors":"Philip G. Gayle, Tyson Thomas","doi":"10.1515/rne-2015-0026","DOIUrl":"https://doi.org/10.1515/rne-2015-0026","url":null,"abstract":"Abstract Much of the literature on airline cooperation focuses on the price effects of cooperation. A key contribution of our paper is to empirically examine the product quality effects of airline cooperation. Two common types of cooperation among airlines involve international alliances and antitrust immunity (ATI), where ATI allows for more extensive cooperation. Additionally, this paper examines the extent to which domestic mergers affect the quality of international air travel products. The results suggest that increases in the membership of a carrier’s alliance or ATI partners and domestic mergers are associated with the carrier’s own products having more travel-convenient routing quality. Therefore, a complete welfare evaluation of airline cooperation and mergers should not ignore product quality effects.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"76 1","pages":"45 - 74"},"PeriodicalIF":0.7,"publicationDate":"2015-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83845462","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.
{"title":"A Welfare Assessment of Revenue Management Systems","authors":"Nicolas Dupuis, M. Ivaldi, J. Pouyet","doi":"10.1515/rne-2020-0038","DOIUrl":"https://doi.org/10.1515/rne-2020-0038","url":null,"abstract":"Abstract We study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"22 1","pages":"1 - 41"},"PeriodicalIF":0.7,"publicationDate":"2015-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83351243","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Since the 1980s, developing countries started to adopt telecom reforms due to pressures from international institutions. However, Middle East and North African (MENA) countries lagged in adopting such reforms. Even after introducing telecom reforms in MENA region beginning in 1995, not all countries became better off in terms of various performance indicators. Therefore, this paper empirically assesses the effects of regulation, privatization and liberalization reforms, as well as their simultaneous presences, on the sector performance in the telecommunication sector using a sample of 17 MENA countries for the period 1995–2010. We assume that different reforms are affected by institutional, political and economic determinants with respect to the level of democracy, the legal origin, the natural resources rents per country and the year of independence from colonization. We use IV-2SLS (Instrumental Variable Two-Stage Least Squares) estimation to analyze the effect of different reforms on telecom performance in terms of access, productivity and affordability in the fixed and the mobile sector. We find that privatization of the main incumbent operator and fixed-line market liberalization affect the sector performance negatively in terms of fixed access and affordability. Moreover, we find that the simultaneous presence of an independent regulator and a privatized incumbent helps to eliminate drawbacks on the sector performance resulting from privatization. However, the simultaneous presences of the other reforms in terms of regulation-competition and privatization-fixed competition do not help to improve the sector performance.
{"title":"Paving the Way for Better Telecom Performance: Evidence from the Telecommunication Sector in MENA Countries","authors":"Riham A. Ezzat","doi":"10.1515/rne-2016-0042","DOIUrl":"https://doi.org/10.1515/rne-2016-0042","url":null,"abstract":"Abstract Since the 1980s, developing countries started to adopt telecom reforms due to pressures from international institutions. However, Middle East and North African (MENA) countries lagged in adopting such reforms. Even after introducing telecom reforms in MENA region beginning in 1995, not all countries became better off in terms of various performance indicators. Therefore, this paper empirically assesses the effects of regulation, privatization and liberalization reforms, as well as their simultaneous presences, on the sector performance in the telecommunication sector using a sample of 17 MENA countries for the period 1995–2010. We assume that different reforms are affected by institutional, political and economic determinants with respect to the level of democracy, the legal origin, the natural resources rents per country and the year of independence from colonization. We use IV-2SLS (Instrumental Variable Two-Stage Least Squares) estimation to analyze the effect of different reforms on telecom performance in terms of access, productivity and affordability in the fixed and the mobile sector. We find that privatization of the main incumbent operator and fixed-line market liberalization affect the sector performance negatively in terms of fixed access and affordability. Moreover, we find that the simultaneous presence of an independent regulator and a privatized incumbent helps to eliminate drawbacks on the sector performance resulting from privatization. However, the simultaneous presences of the other reforms in terms of regulation-competition and privatization-fixed competition do not help to improve the sector performance.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"8 1","pages":"157 - 199"},"PeriodicalIF":0.7,"publicationDate":"2015-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84977889","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Mobile money schemes have grown rapidly in some developing countries but failed in many more. This paper reports the results of an empirical study of mobile money schemes in 22 developing countries chosen based on prior evidence to include roughly equal numbers of successes and failures. It uses a combination of quantitative and qualitative evidence to determine why some countries succeeded in launching mobile money schemes and others failed. The analysis is guided by multi-sided platform economics and in particular recent work on the role of ignition and critical mass. It finds among other things heavy regulation, and in particular an insistence that banks play a central role in the schemes, which is generally fatal to igniting mobile money schemes.
{"title":"An Empirical Examination of Why Mobile Money Schemes Ignite in Some Developing Countries but Flounder in Most","authors":"David S. Evans, Alexis Pirchio","doi":"10.2139/SSRN.2578312","DOIUrl":"https://doi.org/10.2139/SSRN.2578312","url":null,"abstract":"Abstract Mobile money schemes have grown rapidly in some developing countries but failed in many more. This paper reports the results of an empirical study of mobile money schemes in 22 developing countries chosen based on prior evidence to include roughly equal numbers of successes and failures. It uses a combination of quantitative and qualitative evidence to determine why some countries succeeded in launching mobile money schemes and others failed. The analysis is guided by multi-sided platform economics and in particular recent work on the role of ignition and critical mass. It finds among other things heavy regulation, and in particular an insistence that banks play a central role in the schemes, which is generally fatal to igniting mobile money schemes.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"90 1","pages":"397 - 451"},"PeriodicalIF":0.7,"publicationDate":"2014-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76308668","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This survey of the theoretical and empirical literature on alternative policies to promote new fiber-based communications infrastructures addresses (i) various kinds of ex ante sector-specific regulations, (ii) deregulatory approaches based on effective competition law implementation and competitive market structures including co-investment models, and (iii) public subsidies to cover non-profitable (white) areas. The authors identify significant research gaps and present a generic framework for policy recommendations. Public subsidies emerge as the dominant policy alternative in white areas, whereas access regulations can be the preferred policy in white or gray areas, where only monopoly structure or co-investment models lead to private investment. Deregulatory policies might be preferable in gray areas, provided there is sufficient pressure from competitive outside options and if competition law is strong. Finally, deregulatory policies including soft regulation are the dominant policy in black areas, where several independent infrastructure operators exist.
{"title":"The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure – A Survey","authors":"Wolfgang Briglauer, Stefan Frübing, I. Vogelsang","doi":"10.2139/ssrn.2530983","DOIUrl":"https://doi.org/10.2139/ssrn.2530983","url":null,"abstract":"Abstract This survey of the theoretical and empirical literature on alternative policies to promote new fiber-based communications infrastructures addresses (i) various kinds of ex ante sector-specific regulations, (ii) deregulatory approaches based on effective competition law implementation and competitive market structures including co-investment models, and (iii) public subsidies to cover non-profitable (white) areas. The authors identify significant research gaps and present a generic framework for policy recommendations. Public subsidies emerge as the dominant policy alternative in white areas, whereas access regulations can be the preferred policy in white or gray areas, where only monopoly structure or co-investment models lead to private investment. Deregulatory policies might be preferable in gray areas, provided there is sufficient pressure from competitive outside options and if competition law is strong. Finally, deregulatory policies including soft regulation are the dominant policy in black areas, where several independent infrastructure operators exist.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"10 1","pages":"227 - 270"},"PeriodicalIF":0.7,"publicationDate":"2014-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82248506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Analysts of air travel markets, which include antitrust authorities, are interested in understanding the extent to which the presence of intermediate stop(s) products influences the pricing of nonstop products. This paper uses a structural econometric model to investigate the potential pricing interdependence between these two product types in domestic air travel markets. Counterfactual experiments using the estimated model suggest that in many (but far from a majority) markets the current prices of nonstop products are at least 5% lower than they would otherwise be owing to the presence of intermediate-stop(s) products.
{"title":"On the Extent to which the Presence of Intermediate-stop(s) Air Travel Products Influences the Pricing of Nonstop Air Travel Products","authors":"Philip G. Gayle, Chi-Yin Wu","doi":"10.1515/rne-2015-0023","DOIUrl":"https://doi.org/10.1515/rne-2015-0023","url":null,"abstract":"Abstract Analysts of air travel markets, which include antitrust authorities, are interested in understanding the extent to which the presence of intermediate stop(s) products influences the pricing of nonstop products. This paper uses a structural econometric model to investigate the potential pricing interdependence between these two product types in domestic air travel markets. Counterfactual experiments using the estimated model suggest that in many (but far from a majority) markets the current prices of nonstop products are at least 5% lower than they would otherwise be owing to the presence of intermediate-stop(s) products.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"53 1","pages":"355 - 395"},"PeriodicalIF":0.7,"publicationDate":"2014-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86501311","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Commercial ceilings not only restrict broadcasters in their decisions about commercial broadcasting time, but also affect their differentiation of program content. This study examines the welfare effects of commercial ceilings in a two-sided free-to-air TV market, taking into account welfare with respect to content differentiation. We identify a second-best commercial ceiling that maximizes welfare in the absence of enforceable program content regulation and identify the situations in which laissez faire is optimal. The deregulation of commercial broadcasting can improve welfare, even if the laissez-faire level of commercial broadcasting time is excessive.
{"title":"Are Commercial Ceilings Appropriate for the Regulation of Free-to-Air TV Channels?","authors":"J. Rothbauer, G. Sieg","doi":"10.1515/rne-2013-0111","DOIUrl":"https://doi.org/10.1515/rne-2013-0111","url":null,"abstract":"Abstract Commercial ceilings not only restrict broadcasters in their decisions about commercial broadcasting time, but also affect their differentiation of program content. This study examines the welfare effects of commercial ceilings in a two-sided free-to-air TV market, taking into account welfare with respect to content differentiation. We identify a second-best commercial ceiling that maximizes welfare in the absence of enforceable program content regulation and identify the situations in which laissez faire is optimal. The deregulation of commercial broadcasting can improve welfare, even if the laissez-faire level of commercial broadcasting time is excessive.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"1 1","pages":"157 - 173"},"PeriodicalIF":0.7,"publicationDate":"2014-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91317445","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this paper we analyze how firms’ R&D investment decisions, firms’ profits and social welfare are affected by absorptive capacity; that is, the ability of a firm to learn from other collaborating firms. The model developed is a strategic regular network where firms have the opportunity to form pair-wise collaborative links with other firms and then compete à la Cournot. Different to the existing literature, we find that firms’ R&D efforts could increase or decrease with the degree of the network, depending on the level of absorptive capacity, the market size and the network dimension. In particular, in the case of small market size and low learning effect, the connection between firms drives up research investments. Moreover, if absorptive capacity is sufficiently low, the research collaboration between firms turns out not to be desirable from a private point of view while, in line with the existing literature, social efficiency requires a complete or intermediate level of collaborative activity. We also show that the complete network is pair-wise stable and socially optimal for an intermediate level of spillover intensity, while the empty network maximizes firms’ profits when absorptive capacity is small, yet it is not pair-wise stable.
{"title":"R&D Cooperation in Regular Networks with Endogenous Absorptive Capacity","authors":"L. Correani, Giuseppe Garofalo, Silvia Pugliesi","doi":"10.1515/rne-2014-0007","DOIUrl":"https://doi.org/10.1515/rne-2014-0007","url":null,"abstract":"Abstract In this paper we analyze how firms’ R&D investment decisions, firms’ profits and social welfare are affected by absorptive capacity; that is, the ability of a firm to learn from other collaborating firms. The model developed is a strategic regular network where firms have the opportunity to form pair-wise collaborative links with other firms and then compete à la Cournot. Different to the existing literature, we find that firms’ R&D efforts could increase or decrease with the degree of the network, depending on the level of absorptive capacity, the market size and the network dimension. In particular, in the case of small market size and low learning effect, the connection between firms drives up research investments. Moreover, if absorptive capacity is sufficiently low, the research collaboration between firms turns out not to be desirable from a private point of view while, in line with the existing literature, social efficiency requires a complete or intermediate level of collaborative activity. We also show that the complete network is pair-wise stable and socially optimal for an intermediate level of spillover intensity, while the empty network maximizes firms’ profits when absorptive capacity is small, yet it is not pair-wise stable.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"26 1","pages":"191 - 226"},"PeriodicalIF":0.7,"publicationDate":"2014-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73835545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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