Investment and market power in mobile mergers

Georges Vivien Houngbonon and François Jeanjean

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2019, vol. 46, issue 1, No 4, 65-81

Abstract: Abstract 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.

Keywords: Market structure; Merger; Mobile telecommunications (search for similar items in EconPapers)
JEL-codes: D21 D22 L13 L40 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s40812-019-00110-4

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