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Market Penetration and Late Entry in Mobile Telephony

Authors: Hoernig, Steffen - Universidade Nova de Lisboa
Keywords: Mobile Telephony, Entry, Penetration, Mobile termination rates
Issue Date: 2008
Series/Report no.: Net Institute Working Paper;08-38
Abstract: We consider some two dynamic models of entry in mobile telephony, with and without strategic pricing, and taking into account market penetration at entry, locked-in consumers and tariff-mediated network externalities. We show that on/off-net differentials may reduce the possibility of entry if incumbents are large, while they have no long-run effects if there are no locked-in consumers, or reduce the difference in subscriber numbers in their presence. Asymmetric fixedto- mobile or mobile-to-mobile termination rates increase (decrease) market share and profit of the network with the higher (lower) rate. While the fixed-to-mobile waterbed effect is not full at the network level, it will be full in the aggregate.
Appears in Collections:NET Institute Working Papers Series

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