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Market Structure and Investment in the Mobile Industry

François Jeanjean () and Georges Vivien Houngbonon ()

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Abstract: The impact of market structure, that is the number of firms and asymmetry , on investment is an important topic in the mobile industry. However, previous literature remains ambiguous about the direction of the relationship. This paper provides an empirical evidence of the impact of market structure on investment in the European mobile industry. The empirical assessment is based on a Salop model with vertical differentiation. Consistently with the prediction of this model, we find that both the number of operators and market share asymmetry have significant effects on investment. In symmetric markets, investment per operator falls with the number of operators, with larger effects for operators that lose market share more than the average. The industry investment rises with the number of operators in the short run, but eventually falls in the long run due to significant adjustment costs of investment in the mobile industry. These findings suggest that investment should be taken into account when analysing the welfare effects of market structure in the mobile industry.

Keywords: Mobile Telecommunications; Market structure; Investment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-pay and nep-reg
Date: 2017
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01653812
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Published in Information Economics and Policy, Elsevier, 2017

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