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Investment and market power in mobile mergers

Author

Listed:
  • Georges V. Houngbonon

    (Orange Labs)

  • Francois Jeanjean

    (Orange)

Abstract

The welfare effects of mergers in the mobile industry is the topic of an ongoing debate, however, there is still a lack of empirical evidence about the effect on consumer surplus. In this paper, we provide a simple structural model that accounts for investment in order to investigate the effect of mergers on consumer surplus in the mobile industry. Using a Cournot model with investment in cost-reducing technologies, and data on mobile Internet traffic from 18 European markets, we find that consumer surplus is maximized in markets with 3 symmetric operators. This finding accords well with a rising price per user and investment as a result of a merger. It suggests that, in mobile mergers, except 3-2 merger, dynamic efficiencies from investment outweigh static efficiencies from market power.

Suggested Citation

  • Georges V. Houngbonon & Francois Jeanjean, 2019. "Investment and market power in mobile mergers," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 65-81, March.
    • Handle: RePEc:spr:epolin:v:46:y:2019:i:1:d:10.1007_s40812-019-00110-4
    DOI: 10.1007/s40812-019-00110-4
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    References listed on IDEAS

    as
    1. Georges Vivien Houngbonon & François Jeanjean, 2016. "What level of competition intensity maximises investment in the wireless industry?," PSE-Ecole d'économie de Paris (Postprint) halshs-01510421, HAL.
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    More about this item

    Keywords

    Market structure; Merger; Mobile telecommunications;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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