Economic Analysis of Mobile Handset Subsidy Competition: Profitable Subsidy Competition and Regulatory Implications

Posted: 7 Oct 2013

Date Written: September 30, 2013

Abstract

This paper examines the economic effects and outcome under mobile phone subsidy competition by a simple Hotelling location model. The results show that i) MNOs still can enjoy a positive profit even with severe subsidy competition unless MNO-level differentiation goes away, ii) the size of profit is much closer to that of pure price competition as a higher transaction cost is associated with retailers, and iii) a successful clearing of transaction cost can induce the MNOs' voluntary transition to pure price competition.

Keywords: Mobile phone subsidy, Subsidy competition, Pure price competition

Suggested Citation

Kim, Weonseek, Economic Analysis of Mobile Handset Subsidy Competition: Profitable Subsidy Competition and Regulatory Implications (September 30, 2013). International Telecommunications Policy Review, Vol. 20, No. 3, 2013, Available at SSRN: https://ssrn.com/abstract=2336765

Weonseek Kim (Contact Author)

Chung-Ang University ( email )

221 Heuksuk-dong
Dongjak-gu
Seoul, 156-756
Korea, Republic of (South Korea)

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