Competition and Quality: Evidence from the Entry of Mobile Network Service

Marc Bourreau and Yutec Sun ()
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Yutec Sun: CREST-ENSAI, 51 Rue Blaise Pascal, 35170 Bruz, France

No 22-04, Working Papers from NET Institute

Abstract: We measure the impact of a new entry on quality supply and welfare in the French mobile service market, where the service providers compete on investing in network resources to meet fast-growing demand for mobile consumption. As network's quality is endogenous to strategic investments, it is unclear whether the entry led the market closer to the socially optimal level of quality supply and welfare. We develop a tractable approach to empirically analyze the dynamic oligopoly game of investment in the network resources in the market where consumers face substantial costs of switching among differentiated services. The counterfactual analysis finds that the quality may be oversupplied in oligopoly competition from the social welfare perspective, while the merger is predicted to yield undersupplied quality.

Keywords: entry; quality; competition; investment; innovation (search for similar items in EconPapers)
JEL-codes: L13 L43 L96 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-09
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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