Entry under Subsidy: the Competitive U.S. Local Telephone Industry

Mo Xiao and Ying Fan ()

No 374, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: The 1996 Telecommunication Act introduces entry into an originally monopolistic U.S. local telephone industry. As competitors cherry pick rich, urban markets to enter, the Act calls for an explicit and pro-competitive subsidy policy to narrow the potential divide in telecom infrastructure. To study relevant economic factors in the design of such a policy, we estimate a dynamic oligopoly entry game using data on the competitors' entry decisions into local markets. As we observe the identities of potential entrants and their waiting time before actual entry, we allow these firms to be heterogeneous long-run players who have the option value of waiting. We find that both market- and firm-level heterogeneity plays an important role in a potential entrant's local entry decisions. Moreover, these entry decisions are significantly influenced by the consideration of both current and future competition. Using structural estimates, we evaluate the effectiveness of different subsidy policies.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2012/paper_374.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:374

Access Statistics for this paper

More papers in 2012 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().