The Influence of Product Quality Differentiation on Telecom Carriers' Collusion

Abstract

The telecom industry is a typical oligopolistic industry, so telecom carriers are easy to conspire in the course of operation. This article analyzes the influence of product quality differentiation on telecom carrier collusion by constructing a game model. The results show that the critical discount factor that keeps telecom carriers persisting in collusion increases with the decrease of product quality differentiation, that is, the smaller the product quality differentiation is, the harder it is for telecom carriers to adhere to long-term collusion. Conversely, the greater the product quality differentiation is, the greater the risk of a large number of users leaving the network can be when telecom carriers betray the collusion, so they will not easily betray it. Therefore, the product quality differentiation is conducive to the realization and maintenance of telecom carrier collusion. At the same time, telecom carriers that provide different quality products have different incentives for collusion, among which those providing low-quality products are more likely to persist in collusion. What is more, this article also finds that China's telecom industry has great product quality differentiation in the full-service operation, so when telecom carriers pursue the differentiation development of product quality, the government should take corresponding measures to prevent their collusion.