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Competition in network industries: Evidence from the Rwandan mobile phone network
Author(s) -
Björkegren Daniel
Publication year - 2022
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12405
Subject(s) - competition (biology) , competitor analysis , incentive , mobile phone , network effect , business , investment (military) , industrial organization , phone , forcing (mathematics) , welfare , database transaction , cellular network , microeconomics , economics , telecommunications , marketing , computer science , market economy , ecology , linguistics , philosophy , programming language , climatology , politics , political science , law , biology , geology
This article analyzes the potential for competition policy to affect welfare and investment in a network industry. When a network is split between competitors, each internalizes less network effects, but may still invest to steal customers. I structurally estimate consumers' utility from adopting and using mobile phones, with transaction data from nearly the entire Rwandan network. I simulate the equilibrium choices of consumers and network operators. Adding a competitor earlier could have reduced prices and increased incentives to invest in rural towers, increasing welfare by the equivalent of 1% of GDP. However, forcing free interconnection can lower incentives to invest.