The Effect of Entry and Market Structure on Cellular Pricing Tactics

NET Institute Working Paper No. 03-13

47 Pages Posted: 14 Nov 2004

See all articles by Katja Seim

Katja Seim

Yale School of Management

V. Brian Viard

Cheung Kong Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 2004

Abstract

We test the effect of entry on the tariff choices of incumbent cellular firms. We relate the change in the breadth of calling plans between 1996, when incumbents enjoyed a duopoly market, and 1998, when incumbents faced increased competition from personal communications services (PCS) firms. Entry by PCS competitors differed across geographic markets due to the number of licenses left undeveloped as a result of the bankruptcy of some of the auctions' winning bidders and due to variation across markets in the time required to build a sufficiently large network of wireless infrastructure. We find that incumbents increase tariff variety in markets with more entrants and that this effect is not explained by demographic heterogeneity or cost differences in maintaining calling plans across markets. We also find that incumbents are more likely to upgrade their technology from the old analog technology to the new digital technology in markets with more entry, suggesting that entry also has indirect effects on tariff choice via firms' technology adoption decisions.

Keywords: entry, market structure, cellular, price discrimination, nonlinear pricing, telecommunications

JEL Classification: L11, L13, L25, L96

Suggested Citation

Seim, Katja and Viard, V. Brian, The Effect of Entry and Market Structure on Cellular Pricing Tactics (November 2004). NET Institute Working Paper No. 03-13. Available at SSRN: https://ssrn.com/abstract=618221 or http://dx.doi.org/10.2139/ssrn.618221

Katja Seim (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

V. Brian Viard

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
86-10-8518-8858 (Phone)
86-10-8518-6800 (Fax)

HOME PAGE: http://english.ckgsb.edu.cn/faculty_content/brian-viard

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