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Presented By: Department of Economics

Applied Microeconomics | Industrial Organization: Regulation and Service Provision in Dynamic Oligopoly: Evidence from Mobile Telecommunications.

Joao Granja De Almeida, UCL

econ umich econ umich
econ umich
Abstract:
I study coverage requirements, a common regulation in the mobile telecommunications industry that intends to accelerate the roll-out of new mobile telecommunications technologies to disadvantaged areas. I argue that the regulation may engender entry deterrence effects that limit its efficacy and lead to technology introduction patterns that are not cost-efficient. To quantify the impact of coverage requirements on market structure and the speed and cost of technology roll-out, I develop and estimate a dynamic game of entry and technology upgrade under regulation. I estimate the model using panel data on mobile technology availability at the municipality level in Brazil. In counterfactual simulations, I find that coverage requirements accelerate the introduction of 3G technology by just over 1 year, on average, and reduce firms' profits by 24% relative to a scenario with no regulation. I find the entry deterrence effects to be small. Moreover, an alternative subsidization policy leads to a similar acceleration in the roll-out of 3G and substantially higher aggregate profits, likely increasing aggregate welfare relative to coverage requirements.

* To join the seminar, please contact at econ.events@umich.edu

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November 5, 2021 (Friday) 10:00am
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