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| Title: | Crowding Out or Complementarity in the Telecommunications Market? |
| Authors: | Ribeiro, Ricardo - London School of Economics
Vareda, Joao - Universidade Nova de Lisboa |
| Keywords: | Telecommunications, Mobile, Fixed, Demand, Substitution, Complementarity |
| Issue Date: | 2007 |
| Series/Report no.: | NET Institute Working Paper;07-33 |
| Abstract: | There is a substantial number of cases where the a priori relationship
between products is not at all clear in the sense that although apparent
to be clear substitutes may turn out to be in fact complements, or
vice-versa. This paper aims to study the relationship between fixed and
mobile telephony in the United Kingdom and, in particular, address the
question if mobile communications crowded out fixed telephony or if, on
the other hand, the two types of communications are in fact complements.
We estimate a structural continuous-choice demand model following Pinkse
et al. (2002), Pinkse and Slade (2004), and Slade (2004) and we find
that at the current diffusion stage, fixed and mobile communications
appear to be complements. Given that the model is micro-founded, we also
address the question of how the evolution of the price differential
between the two types of communication may, respectively, affect the
welfare of consumers and firms. We find that the continuation of these
price trends have substantial welfare benefits for subscribers and at
the same time have no significant impact on the pro ts for firms.
Finally, we present some economic policy implications, especially about
the need to (de)regulate telecommunications provision. |
| URI: | http://hdl.handle.net/2451/28513 |
| Appears in Collections: | NET Institute Working Papers Series
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