Market Penetration and Late Entry in Mobile Telephony
29 Pages Posted: 30 Oct 2008
Date Written: October 1, 2008
We consider some two dynamic models of entry in mobile telephony, with and without strategic pricing, and taking into account market penetration at entry, locked-in consumers and tariff-mediated network externalities. We show that on/off-net differentials may reduce the possibility of entry if incumbents are large, while they have no long-run effects if there are no locked-in consumers, or reduce the difference in subscriber numbers in their presence. Asymmetric fixed-to-mobile or mobile-to-mobile termination rates increase (decrease) market share and profit of the network with the higher (lower) rate. While the fixed-to-mobile waterbed effect is not full at the network level, it will be full in the aggregate.
Keywords: Mobile Telephony, Entry, Penetration, Mobile termination
JEL Classification: L13, L51, L96
Suggested Citation: Suggested Citation