Screening competition in mobile telephony†

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Abstract:

This article presents a simple method for screening competition in differentiated products oligopoly with a small number of competitors. In many situations, estimation of price elasticities of demand may be impossible due to difficulties in defining demand or missing data on sales. However, even without information on price elasticities, in certain situations it is possible to test for the static noncooperative Nash–Bertrand equilibrium, which in the case of rejection, may be important screening information for antitrust authorities. The static noncooperative Nash–Bertrand equilibrium may be rejected when demand is linear and in the estimation of best-response functions, the coefficients on the competitors’ prices are statistically greater than 0.5. The application of this method is illustrated by the example of German mobile telephony using monthly data between January 1998 and December 2002. According to the estimation results, the observed prices in the segment of low-users cannot be the outcome of a static noncooperative Nash–Bertrand equilibrium.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840903153788

Affiliations: Competition Commission, Victoria House, Southampton RowLondonWC1B 4AD, UK

Publication date: July 1, 2011

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