To Whom the Revenue Goes: A Network Economic Analysis of the Price War in the Wireless Telecommunication Industry

9 Pages Posted: 1 Apr 2017 Last revised: 30 Aug 2017

See all articles by Vaggelis Douros

Vaggelis Douros

RWTH Aachen University

Petri Mähönen

RWTH Aachen University

Date Written: March 31, 2017

Abstract

We analyze the ongoing price war among major mobile data carriers. Understanding better the underlying mechanisms of the noticed price war in the wireless ecosystem is imperative to develop better techno-economical models for future technologies and to plan possible necessary regulatory actions, e.g. in the case of mergers and acquisitions. The detailed analysis requires us to consider the goals and requirements of the key stakeholders, including mobile service providers (MSPs) and end-users. In this paper, we present a network economics analysis under general techno-economical conditions. We consider an oligopoly market where the MSPs aim to attract a pool of undecided users. We define a framework where the users choose a MSP based on both his price and his reputation and we analyze how a MSP might update his pricing policy. Our contributions are two-fold: In technical sense, we explore the division of market shares and respective revenues under different selection of parameters. In the regulatory domain, we analyze how much there is true differentiation possibilities between MSPs.

Keywords: pricing competition, game theory, market regulation

Suggested Citation

Douros, Vaggelis and Mähönen, Petri, To Whom the Revenue Goes: A Network Economic Analysis of the Price War in the Wireless Telecommunication Industry (March 31, 2017). Available at SSRN: https://ssrn.com/abstract=2943987

Vaggelis Douros (Contact Author)

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Petri Mähönen

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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