Market entry and roll-out with product differentiation

Dionisia Tzavara, Paul Levine () and Neil Rickman
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Dionisia Tzavara: University of Surrey

No 176, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: This paper examines a general problem exemplified by post-auction (third generation---`3G') mobile telecommunications markets. When entering these (or any other) markets, firms must often decide on the degree of coverage (`roll-out') they wish to achieve. Prior investment must be sunk in order to achieve the desired (or mandated) coverage level. We study the private and social incentives of a would-be entrant into a market with horizontal product differentiation when choosing its level of roll-out. The endogenous extent of entry influences downstream retail prices; Bertrand or local monopoly pricing or a mixed strategy equilibrium may emerge. Importantly, entry may involve too much or too little roll-out from a social perspective, thus suggesting that regulatory intervention may be appropriate to achieve desired levels of competition in such settings.

Date: 2002-08-29
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Working Paper: Market Entry and Roll-out With Product Differentiation (2002)
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