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The Effects of International Simple Resale on Prices in International Telecommunications Markets

29 Pages Posted: 4 Oct 2009 Last revised: 5 Sep 2014

Jason Pearcy

Montana State University - Bozeman - Department of Agricultural Economics and Economics

Scott Savage

University of Colorado at Boulder - Department of Economics

Date Written: September 30, 2009

Abstract

This paper empirically investigates the effect of international simple resale (ISR) authorization on the prices for international message telephone service (IMTS). We compile a firm-level panel data set for over 200 United States-foreign country bilateral markets from 1995 to 2004. These data provide detailed information on prices, variable costs, fixed costs and market shares for 75 firms for each bilateral market, as well as the timing of ISR authorization by the Federal Communications Commission for each bilateral market. Estimates from a difference-in-differences model show that ISR authorization, and the associated lowering of barriers to entry, almost always results in lower prices for all markets. Additionally, we find evidence that ISR authorization alters the relationship between market concentration and price. Prior to ISR authorization more concentrated markets have higher prices. ISR authorization dampens this effect and in some cases reverses the relationship so that market concentration is negatively correlated with IMTS prices set by incumbent firms.

Keywords: barriers to entry, competition, international message telephone prices, international simple resale prices

JEL Classification: L1, L13, L96

Suggested Citation

Pearcy, Jason and Savage, Scott, The Effects of International Simple Resale on Prices in International Telecommunications Markets (September 30, 2009). NET Institute Working Paper No. 09-19. Available at SSRN: https://ssrn.com/abstract=1481819 or http://dx.doi.org/10.2139/ssrn.1481819

Jason Pearcy (Contact Author)

Montana State University - Bozeman - Department of Agricultural Economics and Economics ( email )

Bozeman, MT 59717-2920
United States

HOME PAGE: http://www.montana.edu/jpearcy/

Scott Savage

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-735-1165 (Phone)
303-492-1112 (Fax)

HOME PAGE: http://holiday.colorado.edu/savages/

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