Effects of Spectrum Holdings on Equilibrium in the Wireless Industry

Lhost Jonathan (), Pinto Brijesh and Sibley David
Additional contact information
Lhost Jonathan: Lawrence University, Appleton, WI, United States of America
Pinto Brijesh: World Bank Group, Washington, DC, United States of America
Sibley David: University of Texas at Austin, Austin, TX, United States of America

Review of Network Economics, 2015, vol. 14, issue 2, 111-155

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.

Keywords: industrial organization; networks; spectrum; telecommunications (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/rne-2015-0008

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