Strategic Confusopoly: Evidence from the UK Mobile Telecommunications Market

Ambre Elsas-Nicolle (), Christos Genakos and Tobias Kretschmer
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Ambre Elsas-Nicolle: Institute for Strategy, Technology and Organization (ISTO), Ludwig-Maximilians-University of Munich, CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique
Christos Genakos: Cambridge Judge Business School - CAM - University of Cambridge [Cambridge, UK]
Tobias Kretschmer: Institute for Strategy, Technology and Organization (ISTO), Ludwig-Maximilians-University of Munich

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Abstract: Can entire markets strategically confuse consumers to raise market prices? Using a detailed data set covering virtually all mobile phone tariffs and their handsets in the United Kingdom between January 2010 and September 2012, we study the evolution of quality-adjusted prices and find that they increased until December 2010, even though the industry was mature, technologically homogeneous, and competitive. Upon exploring the role of several salient factors, such as differentiation and product proliferation by firms that may have affected this evolution, we argue that the primary driver is the implementation of obfuscation strategies by firms. The observed price increase is significantly correlated with the rate at which operators implemented dominated tariffs (i.e., tariffs for which there is a cheaper alternative from the same operator), indicating that firms use obfuscation strategies to reduce product transparency, thereby elevating overall prices. Importantly, the presence of dominated tariffs raises not only the prices of these contracts but also, those of efficient ones, distinguishing our findings from a behavioral price discrimination strategy that would only affect inattentive consumers. Our exploratory study is one of the first to offer suggestive evidence of obfuscation as an industry-wide supply-side phenomenon. Funding: A. Elsas-Nicolle acknowledges funding from the European Union's Framework Programme for Research and Innovation Horizon 2020 (2014-2020) under a Marie Sklodowska-Curie Grant Agreement [Grant 754388], LMU Munich's Institutional Strategy LMUexcellent within the framework of the German Excellence Initiative [Grant ZUK22] and LMU Collaboration Funds (2021-2022). C. Genakos acknowledges financial support from the Cambridge Judge Business School [Small Grants Scheme]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/stsc.2024.0285 .

Date: 2025-12-31
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Published in Strategy Science, 2025, ⟨10.1287/stsc.2024.0285⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05445475

DOI: 10.1287/stsc.2024.0285

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