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Co-operative investment by downstream rivals: network sharing in telecom markets

Author

Listed:
  • Øystein Foros

    (NHH Norwegian School of Economics)

  • Bjørn Hansen

    (University of South-Eastern Norway)

  • Thibaud Vergé

    (CREST, ENSAE Paris, Institut Polytechnique de Paris
    University of Bergen)

Abstract

Ever-increasing data consumption and evolving technologies make cooperation on investments and network sharing crucial issues in mobile telecommunications markets. In this paper, we analyze incentives for cooperation and investment in product quality. Generalizing quality investment in a Hotelling duopoly model, we allow investment to have heterogeneous effects on consumers’ changing demand responsiveness to prices. If the effect of investment on demand elasticity is weak, consumer surplus and total welfare are higher when firms are prevented from cooperating on quality investment. Otherwise, firms should be allowed to jointly decide on quality improvements and share these improvements as long as they compete in the downstream markets.

Suggested Citation

  • Øystein Foros & Bjørn Hansen & Thibaud Vergé, 2023. "Co-operative investment by downstream rivals: network sharing in telecom markets," Journal of Regulatory Economics, Springer, vol. 64(1), pages 34-47, December.
    • Handle: RePEc:kap:regeco:v:64:y:2023:i:1:d:10.1007_s11149-023-09462-1
    DOI: 10.1007/s11149-023-09462-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Investment; Quality choice; Network sharing; Cooperation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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