Cooperation Among Competitors: Network Sharing Can Increase Consumer Welfare

34 Pages Posted: 11 May 2020 Last revised: 13 May 2020

See all articles by Frank P. Maier-Rigaud

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Marc Ivaldi

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

C.-Philipp Heller

NERA Economic Consulting

Date Written: March 1, 2020

Abstract

We investigate the effects of network sharing agreements between mobile network operators on prices and consumer welfare, taking also quality effects into account. Network sharing agreements allow multiple network operators to use the same physical infrastructure for the provision of mobile telecommunication services. While such cooperation should lower cost and thereby generate efficiencies, there may be concerns that such cooperation softens competition. We focus on the specific case of the existing network sharing between two operators in the Czech Republic. We first use a difference-in-differences method to show that, in a comparison with a sample of European countries, the network sharing agreement has reduced quality-adjusted prices. We then use a structural economic model to decompose the effect of the network sharing agreement. We find consumer gains both due to a higher implied network quality and reduced marginal costs of service provision. Our findings call for more empirical investigation on the relationship between competition and investment and on how cooperation agreements affect competition.

Keywords: Mobile Telecommunication Networks, Network Sharing, Cooperation on Investment, 4G, 5G Horizontal Cooperation, Empirical Industrial Organization

JEL Classification: L40, L96, L11

Suggested Citation

Maier-Rigaud, Frank P. and Ivaldi, Marc and Heller, C.-Philipp, Cooperation Among Competitors: Network Sharing Can Increase Consumer Welfare (March 1, 2020). Available at SSRN: https://ssrn.com/abstract=3571354 or http://dx.doi.org/10.2139/ssrn.3571354

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

Marc Ivaldi

Toulouse School of Economics ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 8592 (Phone)
+33 5 61 12 8637 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

C.-Philipp Heller

NERA Economic Consulting ( email )

50 Main Street, 14th Floor
White Plains, NY 10606
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
165
Abstract Views
657
rank
209,836
PlumX Metrics