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Entry in telecommunication : customer loyalty, price sensitivity and access prices

Lommerud, Kjell Erik; Sørgard, Lars
Working paper
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URI
http://hdl.handle.net/11250/162902
Date
2002-07
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  • Discussion papers (SAM) [608]
Abstract
The purpose of this article is to investigate the prospects for entry into an existing

network in the telecommunication industry, and how public policy may promote a

more competitive outcome. We apply a model that captures the fact that the

incumbent has an installed base of loyal consumers, some consumers are price

sensitive, and the entrant is charged an access fee for entering the network. We

distinguish between classical (de novo) entry and reciprocal entry (incumbent entering

the neighbouring market), and analyse how such public policy measures as (i)

publication of prices by the authorities and (ii) lower access fees affect the

competitive outcome. In the reciprocal entry model we find that lower access fees

tend to discourage entry into a neighbouring market, while the publishing of prices has an ambiguous effect on entry.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2002:15

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