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Strategic use of external benefits for entry deterrence: the case of a mobile telephony market

Author

Listed:
  • Mikołaj Czajkowski

    (Faculty of Economic Sciences, University of Warsaw)

  • Maciej Sobolewski

    (Faculty of Economi Sciences, University of Warsaw)

Abstract

Recent models of network competition demonstrate the incentives of incumbents to reduce receiver benefits in rival networks through excessive off-net pricing. Theoretical reasoning behind strategic use of call externalities assumes that receiving calls contributes to consumer utility. This paper tests this critical assumption with choice data elicited from users of mobile telephones. We find that receiver benefits are a significant driver of subscription choices and assess customer base stealing effect encountered by the late entrant. Our findings confirm that call externalities can be used to limit late entrants’ growth as has been observed in many European mobile telephony markets.

Suggested Citation

  • Mikołaj Czajkowski & Maciej Sobolewski, 2016. "Strategic use of external benefits for entry deterrence: the case of a mobile telephony market," Working Papers 2016-27, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2016-27
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    References listed on IDEAS

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    Cited by:

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    2. Clavijo, R, 2022. "Price discrimination under nonuniform calling circles and call externalities," Documentos de Trabajo 20054, Universidad del Rosario.

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    More about this item

    Keywords

    call externalities; personal network effects; entry deterrence; mobile telephony; stated preferences; discrete choice experiment;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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