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Is Mobile Telephony a Natural Oligopoly?

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Abstract

This paper presents a model of competitive interaction among mobile telecommunications operators. Operators can offer services in twoseparate markets, urban and rural areas, and customers commute between them. Market coverage of an operator can then be interpreted as a parameter of vertical productdifferentiation. The main implication is that the industry has strong features of a``natural oligopoly'': Only a limited number of operators with possibly different coverage cansurvive in equilibrium. It is also shown that competing operators do not have an incentiveto reach roaming agreements over non-overlapping areas. On the contrary, roamingcan be easily agreed upon by colluding operators.

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Authors and Affiliations

  1. Imperial College London and CEPR, UK

    Tommaso M. Valletti

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  1. Tommaso M. Valletti
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Valletti, T.M. Is Mobile Telephony a Natural Oligopoly?. Review of Industrial Organization 22, 47–65 (2003). https://doi.org/10.1023/A:1022191701357

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  • DOI: https://doi.org/10.1023/A:1022191701357

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