Seminari
seminari 07.01.2020 El departament  -  Seminari

Dimarts, 11 de febrer de 2020
Seminari A, 13.30 h

Frank Verboven
KUL
"Market entry, fighting brands and tacit collusion: the case of the French mobile telecom market with M. Bourreau and Y. Sun"

Abstract:

We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbent firms. Using an empirical oligopoly model with differentiated products, we find that the incumbents’ fighting brand strategies cannot be rationalized as unilateral best responses to new entry in a static game. Instead, we show how the incumbents’ strategies can be rationalized as a breakdown of tacit collusion: in the absence of entry the incumbents could successfully collude on restricting their product variety to avoid cannibalization; the new entry of the low-end competition made such semi-collusion harder to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety of the new entrant and the fighting brands, and to a lesser extent from the incumbents’ price response to the entry.

 

 



 
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