Abstract
The impact of market structure on investment is an important topic in the mobile industry. However, previous literature remains ambiguous about the direction of the relationship. This paper takes advantage of the exogeneity of the number of mobile operators to investigate its impact on investment, taking into account market share asymmetry and the adjustment cost of investment. The empirical analysis is backed by a theoretical model that introduces vertical differentiation in a Salop model. Consistently with the prediction of this model, we find that investment per operator falls with the number of operators. This negative effect is bigger for smaller operators. The industry investment tends to rise with the number of operators in the short run, but eventually falls in the long run, due to significant adjustment cost of investment in the mobile industry. These findings suggest that investment is an endogenous variable that should be taken into account when analyzing the welfare effects of entry and mergers in mobile markets.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
