Factors for wireless operators' collusion and competition

Abstract

This article analyses on why China Mobile and China Unicom have chosen price war rather than tacit collusion these years. On the basis of the analysis on factors that influence tacit collusion, and combined with the facts of wireless communication market, the author suggests that the market asymmetries, cost asymmetries, and product differentiation are the basic factors, which trigger price competition between the Chinese wireless operators. By constructing a game model based on Churn rate, this article discusses how these factors cause a fight between the operators and how vigorous the price competition will be. At last, the author suggests that to keep vigor in this industry, continuous structural adjustment is essential. Besides, the number portability policies may cause tacit collusion.