Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market

48 Pages Posted: 16 Apr 2018  

Marc Bourreau

Telecom ParisTech; CREST

Yutec Sun

KU Leuven

Frank Verboven

KU Leuven

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

Abstract

We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbent firms. Using an empirical oligopoly model with differentiated products, we show that the incumbents' launch of the fighting brands can be rationalized only as a breakdown of tacit collusion. In the absence of entry the incumbents successfully colluded on restricting their product variety to avoid cannibalization; the new entry of the low-end competition made such semi-collusion more difficult to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety of the new entrant and the fighting brands, and to a lesser extent from the incumbents' price response to the entry.

Keywords: Entry, fighting brand, Mobile telecommunications, product variety, semi-collusion

JEL Classification: L13, L96

Suggested Citation

Bourreau, Marc and Sun, Yutec and Verboven, Frank, Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market (April 2018). CEPR Discussion Paper No. DP12866. Available at SSRN: https://ssrn.com/abstract=3163519

Marc Bourreau (Contact Author)

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

CREST

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Yutec Sun

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Frank Verboven

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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