Market Entry, Fighting Brands, and Tacit Collusion: Evidence from the French Mobile Telecommunications Market
American Economic Review
vol. 111,
no. 11, November 2021
(pp. 3459-99)
(Complimentary)
Abstract
We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbents. Using an empirical oligopoly model, we find that the incumbents' fighting brand strategies are difficult to rationalize as unilateral best responses. Instead, their strategies are consistent with a breakdown of tacit semi-collusion: before entry, the incumbents could successfully coordinate on restricting product variety to avoid cannibalization; after entry, this outcome became harder to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety and, to a lesser extent, from the incumbents' price responses.Citation
Bourreau, Marc, Yutec Sun, and Frank Verboven. 2021. "Market Entry, Fighting Brands, and Tacit Collusion: Evidence from the French Mobile Telecommunications Market." American Economic Review, 111 (11): 3459-99. DOI: 10.1257/aer.20190540Additional Materials
JEL Classification
- L13 Oligopoly and Other Imperfect Markets
- L21 Business Objectives of the Firm
- L96 Telecommunications
- M31 Marketing