Competition in network industries: Evidence from the Rwandan mobile phone network

ABSTRACT: This article analyzes the potential for competition policy to affect welfare and investment in a network industry. When a network is split between competitors, each internalizes less network effects, but may still invest to steal customers. I structurally estimate consumers’ utility from adopting and using mobile phones, with transaction data from nearly the entire Rwandan network. I simulate the equilibrium choices of consumers and network operators. Adding a competitor earlier could have reduced prices and increased incentives to invest in rural towers, increasing welfare by the equivalent of 1% of GDP. However, forcing free interconnection can lower incentives to invest.

SUBMITTER: Bjorkegren D 

PROVIDER: S-EPMC10438865 | biostudies-literature | 2022 Jan

REPOSITORIES: biostudies-literature