Competition Vs. Regulation In Mobile Telecommunications

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Executive Summary

This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. The authors show that the monopolistic outcome may prevail independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic.

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