nep-com New Economics Papers
on Industrial Competition
Issue of 2012‒08‒23
thirty papers chosen by
Russell Pittman
US Department of Justice

  1. Vertical integration, market floreclosure and quality investment. By Hernán, Roberto; Kujal, Praveen
  2. Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly By Mitraille, Sébastien; Moreaux, Michel
  3. Competition between Multiproduct Firms with Heterogeneous Costs By Roberto Roson
  4. Quality improvement to meet competitive fringe By Noriaki Matsushima; Ren-Jye Liu
  5. Endogenous Entry in Markets with Unobserved Quality By Anthony Creane; Thomas D. Jeitschko
  6. Scope economies, entry deterrence and welfare By Cesaltina Pacheco Pires; Margarida Catalão-Lopes
  7. Regulated input price, vertical separation, and leadership in free entrymarkets By Toshihiro Matsumura; Noriaki Matsushima
  8. Technical progress and product reliability under competition and monopoly By George, Donald A R
  9. Virtual unbundling: Gift of nemesis to competition? By Weber, Jan
  10. Does Reliable Pirated Product Lead to More Piracy? By Yuanzhu Lu; Sougata Poddar
  11. Defensive Disclosure under Antitrust Enforcement By Ajay Bhaskarabhatla; Enrico Pennings
  12. Evaluating Mergers for Coordinated Effects and the Role of 'Parallel Accommodating Conduct' By Joseph E. Harrington, Jr.
  13. Responses of European competition policy to the challenges of the global economic crisis By Czékus, Ábel
  14. New and larger costs of monopoly and tariffs By James A. Schmitz, Jr.
  15. Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal By Ryan L. Lampe; Petra Moser
  16. How bank competition affects firms'access to finance By Love, Inessa; Peria, Maria Soledad Martinez
  17. Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion By Hugo E. Silva; Erik T. Verhoef; Vincent A.C. van den Berg
  18. Is the google platform a two-sided market? By Luchetta, Giacomo
  19. The impact of telecommunication technologies on competition in services and goods markets: Empirical evidence By Jerbashian, Vahagn; Kochanovay, Anna
  20. Incentive to invest in improving the quality in telecommunication industry By Jeanjean, François
  21. Tariff-Mediated Network Effects versus Strategic Discounting: Evidence from German Mobile Telecommunications By Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
  22. Mobile only users powered by fixed-mobile substitution By Liangy, Julienne; Petulowa, Marc
  23. Asymmetry of mobile termination rates and the waterbed effect By Lee, Jongyong; Lee, Duk Hee
  24. Ex-ante margin squeeze tests in the telecommunications industry: What is a reasonably efficient operator? By Gaudina, Germain; Saavedra Valenzuelab, Claudia
  25. Impacts of mobile termination rates (MTRs) on retail prices: The implication for regulators By Kongaut, Chatchai; Bohlin, Erik
  26. Virtual unbundling: The basis for competition in next generation access networks? By Reichl, Wolfgang; Ruhle, Ernst-Wolfgang; Lundborg, Martin; Ehrler, Matthias
  27. Network neutrality and consumer discrimination: Comparing ISP's GTCs and DPI application By Grove, Nico; Agic, Damir; Sedlmeir, Joachim
  28. How large is the magnitude of fixed-mobile call substitution? Empirical evidence from 16 Europen countries By Barth, Anne-Kathrin; Heimeshoff, Ulrich
  29. The effect of on-net / off-net differentiation and heterogeneuous consumers on network size in mobile telecommunications : an agent-based aporoach By Muck, Johannes
  30. Net neutrality under usage-based pricing: A game-theoretic analysis with user loyalty By Trinh, Tuan Anh; Abos, Imre; Sallai, Gyula

  1. By: Hernán, Roberto; Kujal, Praveen
    Abstract: We study incentives to vertically integrate in an industry with vertically differentiated downstream firms. Vertical integration by one of the firms increases production costs for the rival. Increased production costs negatively affects quality investment both by the integrated firm and the unintegrated rival. Quality investment by both firms decreases under any (vertical integration) scenario. The decrease in quality invesment by both firms softens competition among downstream firms. By integrating first, a firm always produces the high quality good and earns higher profits. A fully integrated industry, with increased product differentiation, is observed in equilibrium. Due to increase in firm profits, social welfare under this structure is greater than under no integration.
    Keywords: Vertical integration; Quality investment; Market power; Product differentiation;
    JEL: L15 L22 L42
    Date: 2012–04
  2. By: Mitraille, Sébastien (Université de Toulouse, Toulouse Business School); Moreaux, Michel (Toulouse School of Economics (IDEI and LERNA))
    Abstract: Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash-perfect equilibria, in which some firms store to exert endogenously a leadership over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased sales and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and aggregate sales increase due to the strategic use of inventories.
    JEL: D43 L13
    Date: 2012–02
  3. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari)
    Abstract: This paper draws upon Feenstra and Ma (2007, 2008), to develop a model of asymmetric competition between multiproduct firms. The model is used to analyze how cost asymmetry affects the equilibrium, with determination of quantity/price as well as product scope per firm. By treating the number of firms as a continuous variable, the model is extended to account for the endogenous determination of the number of firms in a long-run, monopolistically competitive equilibrium, with free entry by heterogeneous firms.
    Keywords: Multiproduct firm, monopolistic competition, product scope, cost asymmetry.
    JEL: D43 L11 L13
    Date: 2012
  4. By: Noriaki Matsushima; Ren-Jye Liu
    Abstract: We investigate what kind of competitive pressure induces existing firms to engage in more intensive innovation activities. We examine two types of competitive pressure: a price decrease in competitive fringe firms and a quality improvement therein. We use an oligopoly model with vertical differentiation to investigate this question. We show that a decrease in the exogenous price of competitive firms induces the two existent leading firms (one high-quality firm and one mid-quality firm) to engage in quality investments more if the ex ante quality level of the high quality product is large enough; otherwise, only the mid-quality firm engages more in quality investment. We also show that an increase in the exogenous quality level of competitive firms diminishes the incentive of the mid-quality firm to engage in quality investments.
    Date: 2012–08
  5. By: Anthony Creane (Department of Economics, Michigan State University); Thomas D. Jeitschko (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)
    Abstract: In markets for experience or credence goods adverse selection can drive out higher quality products and services. This negative implication of asymmetric information about product quality for trading and welfare, poses the question of how such markets first originate. We consider a market in which sellers make observable investment decisions to enter a market in which each seller's quality becomes private information. Entry has the tendency to lower prices, which may lead to adverse selection. The implied price collapse limits the amount of entry so that high prices are sustained in equilibrium, which results in above normal profits. The analysis suggests that rather than observing the canonical market collapse, markets with asymmetric information about product quality may instead be characterized by above normal profits even in markets with low measures of concentration and less entry than would be expected.
    Keywords: adverse selection, asymmetric information, quality, experience goods, cre- dence goods, entry, entry barriers
    JEL: D8 D4 L1
    Date: 2012–08
  6. By: Cesaltina Pacheco Pires (CEFAGE-UE, Departamento de Gestão, Universidade de Évora, Portugal); Margarida Catalão-Lopes (CEG-IST, Instituto Superior Técnico, Technical University of Lisbon)
    Abstract: This paper develops a model where the incumbent may expand to a second related market so as to signal the existence of scope economies and deter potential entry. We show that the incumbent only expands to another market when scope economies are large enough. Thus expansion is indeed a signal of larger economies of scope and, for certain parameter values, it leads to entry deterrence. We show that the perfect bayesian equilibrium may involve entry accommodation, entry deterrence or a mixed strategy equilibrium. We investigate the welfare implications of prohibiting an entry deterrent expansion. In our model, such prohibition would always decrease consumer surplus. The welfare impact of preventing entry deterrence is ambiguous but negative for many parameter values.
    Keywords: Scope economies; signalling; entry deterrence.
    JEL: L14 L15 M37
    Date: 2012
  7. By: Toshihiro Matsumura; Noriaki Matsushima
    Abstract: We examine incentives of bottleneck facility holders to manipulate access charge accounting in free entry downstream markets. We consider the situation wherein one firm holds an upstream bottleneck facility and new entrants use it at the regulated price (access fee) to provide final products. The bottleneck facility holder affects the regulated input price. We investigate how vertical separation affects the incentive for manipulation and the resulting input price. We find that the results depend on whether the incumbent is the Stackelberg leader in the product market. If the incumbent cannot take leadership in the product market and faces Cournot competition, vertical separation reduces the incentive for manipulation and the resulting input price. The opposite result is derived when the incumbent can take leadership in the product market.
    Date: 2012–08
  8. By: George, Donald A R
    Abstract: Technical progress lowers costs and prices but appears to have an ambiguous effect on product reliabilty. This paper presents a simple model which explains this observation.
    Date: 2012
  9. By: Weber, Jan
    Abstract: --
    Date: 2012
  10. By: Yuanzhu Lu (China Economics and Management Academy, Central University of Finance and Economics, Beijing, China.); Sougata Poddar (Department of Economics, Auckland University of Technology, Auckland, New Zealand.)
    Abstract: Conventional wisdom would suggest if a pirated product, which is cheaper than the original product, becomes more reliable then the relative demand of the pirated product or the rate of piracy will increase when consumers have different willingness to pay. However, is this always true? We address this question in a framework where the original product developer makes costly investment to deter pirate(s) in a given regime of IPR protection. We show that the relationship between the rate of piracy and the reliability of the pirated product depends on the nature of the pirate as well as on the nature of the market competition if the pirate is commercial. Under commercial piracy, when the original firm and the pirate compete in quantities, the conventional wisdom holds i.e. the more reliable the pirated product, the higher is the rate of piracy. However, the relationship is non-monotonic, hence the wisdom does not hold when they compete in prices or the pirates are the end-users.
    Keywords: IPR protections, price competition, quantity competition, product quality.
    JEL: D23 D43 L13 L86
    Date: 2012–05
  11. By: Ajay Bhaskarabhatla (Erasmus University Rotterdam); Enrico Pennings (Erasmus University Rotterdam)
    Abstract: We formulate a simple model of optimal defensive disclosure by a monopolist facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM during 1955-1989. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are disclosed defensively, and that defensive disclosure served as an alternative but less successful mechanism to patenting at IBM in appropriating returns from R&D.
    Keywords: Antitrust; Defensive Disclosure; Patent; IBM
    JEL: K21 L40 M10 O32 O34
    Date: 2012–02–09
  12. By: Joseph E. Harrington, Jr.
    Abstract: The 2010 Horizontal Merger Guidelines propose a form of coordinated effects, referred to as "parallel accommodating conduct," that is claimed not to involve the usual evaluation of the ability of firms to detect compliance and punish non-compliance with respect to supracompetitive prices. That claim is argued here to be false. Where the concept of parallel accommodating conduct is valid and constructive is in identifying coordinated effects that do not involve firms having an agreement. These issues are explored here in the context of a more general examination of how firms coordinate on and implement supracompetitive outcomes.
    Date: 2012–07
  13. By: Czékus, Ábel
    Abstract: European competition policy has been one of the common policies since the beginning of European integration. The European level economic policy coordination and the customs union have required a uniform framework for competition policy covering the whole Community. Nowadays the economic integration of Europe is suffering from its biggest crisis ever, which also affects companies based and/or operating in Europe. This brings about new challenges for common competition policy as it has to assure, on one hand, a legal framework to maintain fair competition. The importance of cooperation between competition authorities, for example in the field of restrictive agreements, has been recognised by the European Commission. The Commission, on the other hand, has to deal with an increasing number of merger cases because, after the decline of the number of cases in 2008 and 2009, concentrations have started to intensify again. This is due to the recovery of companies in 2010 and the relaunch of lending activity. Also, competition policy has to stimulate markets as it is also a way to put the European economy on a growing path. Much more emphasis should be put on state aid because it does not only spur economic growth but it could have negative effects as well. This type of excessive spending is problematic in the sense of competition policy and it could eventually even worsen the long term economic perspectives of Europe. The crisis in Europe escalated three years ago. I summarise the legal development and guidelines relating to competition policy after 2008. I examine the block exemption schemes and the extended state aid activities. These are developments that may contribute to the recovery from the crisis. It is essentially important to shape competition policy so that it effectively guards companies’ adaptation process to the new economic circumstances, and stimulates their economic activity.
    Keywords: competition policy; economic crisis; European Commission; legal development
    JEL: F42 D49 G01
    Date: 2012
  14. By: James A. Schmitz, Jr.
    Abstract: Fifty-eight years ago, Harberger (1954) estimated that the costs of monopoly, which resulted from misallocation of resources across industries, were trivial. Others showed the same was true for tariffs. This research soon led to the consensus that monopoly costs are of little significance—a consensus that persists to this day. ; This paper reports on a new literature that takes a different approach to the costs of monopoly. It examines the costs of monopoly and tariffs within industries. In particular, it examines the histories of industries in which a monopoly is destroyed (or tariffs greatly reduced) and the industry transitions quickly from monopoly to competition. If there are costs to monopoly and high tariffs within industries, we should be able to see these costs whittled away as the monopoly is destroyed. ; In contrast to the prevailing consensus, this new research has identified significant costs of monopoly. Monopoly (and high tariffs) is shown to significantly lower productivity within establishments. It also leads to misallocation within industry: resources are transferred from high to low productivity establishments. ; From these histories a common theme (or theory) emerges as to why monopoly is costly. When a monopoly is created, “rents” are created. Conflict emerges among shareholders, managers, and employees of the monopoly as they negotiate how to divide these rents. Mechanisms are set up to split the rents. These mechanisms are often means to reduce competition among members of the monopoly. Although the mechanisms divide rents, they also destroy them (by leading to low productivity and misallocation).
    Keywords: Monopolies ; Competition
    Date: 2012
  15. By: Ryan L. Lampe; Petra Moser
    Abstract: Patent pools, which allow competing firms to combine their patents, have emerged as a prominent mechanism to resolve litigation when multiple firms own patents for the same technology. This paper takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools on innovation within 20 industries. Difference-in-differences regressions imply a 16 percent decline in patenting in response to the creation of a pool. This decline is driven by technology fields in which a pool combined patents for substitute technologies by competing firms, suggesting that unregulated pools may discourage innovation by weakening competition to improve substitutes.
    JEL: K0 L4 N22 O3
    Date: 2012–08
  16. By: Love, Inessa; Peria, Maria Soledad Martinez
    Abstract: Combining multi-year, firm-level surveys with country-level panel data for 53 countries, the authors explore the impact of bank competition on firms'access to finance. They find that low competition, as measured by high values of the Lerner index, diminishes firms'access to finance, while commonly-used bank concentration measures are not robust predictors of firms'access to finance. In addition, they find that the impact of competition on access to finance depends on the environment that banks operate in. Some features of the environment, such as greater financial development and better credit information, can mitigate the damaging impact of low competition. But other characteristics, such as high government bank ownership, can exacerbate the negative effect.
    Keywords: Access to Finance,Banks&Banking Reform,Debt Markets,Economic Theory&Research,Environmental Economics&Policies
    Date: 2012–08–01
  17. By: Hugo E. Silva (VU University); Erik T. Verhoef (VU University); Vincent A.C. van den Berg (VU University)
    Abstract: This paper analyzes airlines' strategic interactions and airport efficient pricing, with a deterministic bottleneck model of congestion, in Cournot-Nash competition and in sequential competition where a Stackelberg leader interacts with perfectly competitive airlines. We show that the internalization of self-imposed congestion by non-atomistic carriers is consistent with earlier literature based on static models of congestion, but the congestion tolls are not. The tolls derived for fully atomistic airlines achieve the social optimum, when charged to all carriers, in the simultanous setting as well as in the sequential setting. We also find that alternative efficient pricing schemes exist for the sequential competition between a dominant airline and a competitive follower. The analysis suggests that airport congestion pricing has a more signicant role than what previous studies have suggested. Moreover, the financial deficit under optimal pricing may be less severe than what earlier studies suggest, as congestion toll revenues may cover optimal capacity investments. Political feasibility would be enhanced as ecient congestion charges do not depend on market shares and therefore may not be perceived as inequitable.
    Keywords: Airport pricing; Congestion; Bottleneck model
    JEL: H23 L50 L93 R48
    Date: 2012–05–25
  18. By: Luchetta, Giacomo
    Abstract: Probably not. Or, at least, it is a sui generis two-sided market. Unlike other platforms, such as Microsoft Windows operating system, credit cards, or night clubs, where a single transaction is performed via the platform, two different transactions take place on Google. Users look for search results, while advertisers look for users' eyeballs. Whilst operating systems, credit cards, and night clubs would be meaningless if either of the two sides were missing, search engines (like TV or newspapers) can exist under different market configurations. Indeed, in search engines network externalities run only from the number of users to advertisers, and not the other way around. This thesis is supported by the analysis of the existing literature on two-sided markets and the applications carried out so far to the economics of search engines. According to this analysis, a new construction of the relevant market where Google operates is proposed. Google operates as a retailer of eyeballs, or users' attention. In the upstream market, on one side, it buys well-profiled eyeballs from large retailers, i.e. major websites, at a positive price (Traffic Acquisition Costs); on the other side, it buys eyeballs from single consumers in exchange of search services (in-kind payment). Then, it sells well-profiled eyeballs to advertisers in the downstream market. Based on this market construction, the allegations against Google are analysed as alleged violations of competition law along this vertical chain. --
    Date: 2012
  19. By: Jerbashian, Vahagn; Kochanovay, Anna
    Abstract: In this paper we empirically show that a more intensive use and wider adoption of telecommunication technologies significantly increases the level of product market competition in services and goods markets. Our result is consistent with the view that the use of telecommunication technologies can lower the costs of entry. This finding is robust to various measures of competition and a range of specification checks. --
    Keywords: Telecommunication technologies,Entry costs,Product market competition
    JEL: L16 O33 O25
    Date: 2012
  20. By: Jeanjean, François
    Abstract: This paper investigates the incentives to invest in improving the quality (as distinguished to investment in a new activity) in telecommunication industry using the empirical example of wireless markets. We highlight that investment incentives are positively related to the potential for technical progress. They also depend on market structure, competition intensity and penetration rate. We show that there is a target amount of investment for each national market that firms strive to achieve. We show that, from a social perspective, this target amount is the best amount that firms are encouraged to invest. Nonachievement of the target amount entails underinvestment, a fall in consumer surplus and welfare and may slow down technical progress. Employing a 30 countries dataset during 8 years, we have empirically found a change in investment behaviour according whether the target amount is achieved or not. A low margin per user may hamper the achievement of the target amount. As a result, the maximum consumer surplus as well as welfare occurs under imperfect competition and not under perfect competition. --
    Keywords: Competition,Investment,Investment incentives,Technical Progress,Regulation
    JEL: D21 D43 D92 L13 L51 L96 O12
    Date: 2012
  21. By: Zucchini, Leon; Claussen, Jörg; Trüg, Moritz
    Abstract: Mobile telecommunications operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but that there is no significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause for on-net discounts but that there may be merit to both explanations.
    Keywords: Competition; Network effects; Mobile telecommunications; Pricing strategies
    JEL: D22 L11 L96
    Date: 2012–07
  22. By: Liangy, Julienne; Petulowa, Marc
    Abstract: In a context of partial …fixed-mobile substitution, we analyze …fixed-mobile bundling and mobile-to-…fixed off-loading in a duopoly model in which consumers buy one or two products. A joint purchase discount mitigates …fixed-mobile substitutability and consequently reduces mobile-only and fixed-only consumers. Practises like introducing a small discount, applied on a bundle of multiple service or mobile-to-…fixed off­loading by both operators are analysed. We …nd that such practises do not have negative impacts on the profi…ts of whole market and lead to both consumers' surplus and welfare gains. The investment incentives in …xed network are positive and can be boosted by FM bundling without considering regulatory intervention and before taking into account of …fixed costs. The investment incentives in mobile network are more likely a situation of prisoners' dilemma where operators should invest as long as there are mobile-only consumers. --
    Date: 2012
  23. By: Lee, Jongyong; Lee, Duk Hee
    Abstract: This paper empirically analyzes the relationship between asymmetric regulation on mobile termination rates and mobile retail prices, using panel data collected from 20 OECD member countries for 22 quarters. In addition to the asymmetry of mobile access charges, the authors also focus on the impact of a number of variables, such as churn rates, mobile penetration rates, and the market concentration index on mobile operators' retail prices. The results reveal that pricing asymmetry in access services has a positive correlation with mobile retail prices. Therefore, this study supports the assumption that the waterbed effect between the asymmetry of mobile termination rates and retail prices may occur. --
    Keywords: Mobile termination rates,Waterbed effect,Asymmetry of MTRs,Mobile retail Rates,Panel data techniques
    JEL: L51 L88 L96
    Date: 2012
  24. By: Gaudina, Germain; Saavedra Valenzuelab, Claudia
    Abstract: In this paper, we study the adjustments that National Regulatory Authorities make to simple margin squeeze tests, when using them ex-ante. More precisely, by inspecting the possible differences between an entrant and the incumbent that would cause a market disadvantage for the former, we provide a formal economic framework that translates these ex-ante specific issues into practical test adjustments. We identify six possible adjustments relevant to ex-ante margin squeeze tests, on the cost, the access charge, or the price parameters. We then review the implementation of margin squeeze tests by European telecommunications National Regulatory Authorities according to these adjustments, as to build a comparable benchmark of implementation choices. --
    Keywords: Margin squeeze,Imputation test,Access regulation,Telecommunications
    JEL: L51 L96
    Date: 2012
  25. By: Kongaut, Chatchai; Bohlin, Erik
    Abstract: Mobile termination rates (MTRs) have been an important issue for regulators and operators in the telecommunications industry. Most regulators, especially the European Commission (EC), have tried to cut MTRs using cost-based regulation in the belief of improving social welfare and encouraging an efficient market. The operators, however, have disagreed and argued that decreasing MTRs can substantially reduce consumer welfare. There is also only a limited number of empirical analyses on the impacts of MTRs. In the new set of up-to-date data from 2006-2011, many countries have continuously reduced their MTRs. This paper therefore aims to enrich the empirical analysis of the impacts of MTRs on retail prices.This paper applies the one-step generalised method of moments (GMM) approach to dynamic panel data. The results support the hypothesis that lower MTRs will reduce consumer retail prices, which is consistent with the EC framework. It is therefore recommended that regulators in the calling party network pays (CPNP) regime reduce MTRs to at least the same level as the operators' cost to raise overall social welfare, especially consumer welfare. However, the approach by each country can differ depending on its situation. --
    Keywords: mobile termination,regulation,retail prices
    Date: 2012
  26. By: Reichl, Wolfgang; Ruhle, Ernst-Wolfgang; Lundborg, Martin; Ehrler, Matthias
    Abstract: Next Generation Access Networks will enable much higher bandwidths than copper based access networks. Although technological progress provides for higher bandwidth on copper as well, most experts agree that next generation access networks finally will be based on fibre optic cables in the entire or part of the access networks. In order to accomplish the migration towards Next Generation Access Networks, high investment is needed and various models for co-operation and co-financing are tried out worldwide. What does the deployment of fibre optic cables in the access networks mean for the wholesale market and competition? Unbundling of copper cables has been the basis for infrastructure based competition in telecommunications networks especially in the European environment for more than a decade. Unbundling of fibre is an option in case of point to point architectures. Current solutions of Fibre-to-the-Curb and Fibre-to-the-Building technologies rely of sharing of fibre infrastructures and make physical unbundling cumbersome. Does this mean the end of physical unbundling and is bitstream access the wholesale product of the future? --
    Date: 2012
  27. By: Grove, Nico; Agic, Damir; Sedlmeir, Joachim
    Abstract: Network neutrality and alleged discriminatory practices on the part of ISPs regarding the transmission of Internet data packets has been the subject of notable scholarly discussion and appears to be a widespread phenomenon. However, it is noteworthy that actual consumer discrimination has only been proven in a small number of individual case studies. Hence, we aim to provide solid evidence for discriminatory behaviour of ISPS in our in-depth study. This lack of overwhelming evidence is not, as we assume, the result of an absence of discriminatory behaviour - on the contrary it may be whittled down to a number of grounds: the absence of studies comparing services offered by ISPs, the existence of high switching costs between operators accruing to consumers, and a lack of awareness on the part of consumer of the putative discriminatory measures, given the information asymmetry between ISP and consumers, where the consumer is not in a position, being able to distinguish between an impaired quality of service and potential discrimination behaviour by the ISP. The paper at hand examines ISPs' traffic management measures and determines whether such practices breach the ISP's contract with the consumer. Relying on an examination of services provided by European ISPs (France, Germany and Italy) we can conclude that data traffic is subject to discriminatory management. Our investigative model is based on M-Lab data (Glasnost Test) and related processing algorithms provided by The Network is Aware project. In order to corroborate our findings that ISPs are breaching their own contractual service agreements, the results regarding discriminatory measures are compared with the contractual General Terms and Conditions (GTC) as agreed between the ISPs and consumers... --
    Keywords: Network neutrality,regulation,General Terms and Conditions,telecommunications,user discrimination
    JEL: D22 D63 G13 I38 K23 L86
    Date: 2012
  28. By: Barth, Anne-Kathrin; Heimeshoff, Ulrich
    Abstract: This paper investigates the degree of fixed-mobile call substitution (FMCS). We use quarterly data from 2004 to mid 2010 on 16 mainly Western European countries. By applying dynamic panel data techniques, we are able to estimate short- and long-run elasticities. The own-price and cross-price elasticities found give strong empirical evidence for substitutional effects towards mobile services. In particular, the estimated cross-price elasticities of the mobile price on the fixed line call demand are relatively large compared to other studies. --
    Keywords: Dynamic Panel Model,Fix-Mobile Substitution,Telecommunication Markets
    Date: 2012
  29. By: Muck, Johannes
    Abstract: I explore the effects of on-net / off-net differentiation on network sizes in mobile telecommunications when both rational and non-rational consumers coexist in the market. In particular, three different types of consumers are modeled: (1) fully informed rational (FIR) consumers who are perfectly informed about the true market shares of all networks and choose the network with the lowest expected cost of a call; (2) partly informed rational (PIR) consumers who only observe market shares within a circular sensing field and choose the network with the lowest expected cost of a call based on these observed market shares; and (3) non-rational (NR) consumers who choose the network with the highest market share among their immediate neighbors. Using an agent-based simulation approach and by systematical variation of four key parameters of the model, three key results emerge. First, if the share of FIR consumers is too high, all consumers will eventually join the initially larger network A. Second, if their share in the population is sufficiently large, NR consumers can prevent the growth of clusters of consumers subscribed to network B. Third, if the share of PIR consumers is high, clusters of consumers subscribed to network B can grow, thereby increasing network B's market share, provided that the radius of their circular sensing field is small enough for the cluster size. --
    Date: 2012
  30. By: Trinh, Tuan Anh; Abos, Imre; Sallai, Gyula
    Abstract: Network neutrality issue has been recently received a great attention from the research community, the industry and the network regulators alike. From the European perspectives, the net neutrality issue is increasingly important because it is also part of the Digital Agenda 2020 recently approved by the European Commission [1, 2]. Until now, usage-based pricing and network neutrality have been considered as two different research problems and very few network neutrality researchers examine usage-based pricing as a main consideration. In addition, the user behaviour such as user loyalty issue should be seriously taken into consideration because users will have an increasingly more important role in the operation and management of the network. In this paper, we address the net neutrality issue by investigating the usage-based pricing in presence of user loyalty from the game-theoretic perspective. The contributions of the paper are twofold. First, we provide game-theoretic models for the interaction among the stakeholders under usage-based pricing under the presence of customer loyalty. Based on the models, we compute the Nash equilibrium prices of the pricing games and discuss the consequences and the impact on net neutrality. Results show both positive and negative impacts of usage-based pricing on net neutrality. From the user perspective, the usage-based pricing does not show advantage over simple flat-rate pricing. On the positive side, our results also suggest that under certain circumstances cooperation between broadband providers can make the network be more profitable and yet sustainable. Based on the results, we discuss the practical feasibility of applying usage-based pricing for net neutrality under the presence of user loyalty. --
    Date: 2012

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