Political Determinants of Competition in the Mobile Telecommunication Industry

Political Determinants of Competition in the Mobile Telecommunication Industry

Mara Faccio, Luigi Zingales

Series number :

Serial Number: 
494/2017

Date posted :

May 07 2018

Last revised :

January 20 2017
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Keywords

  • political connections • 
  • Capture • 
  • Antitrust

We study how political factors can shape competition in the mobile telecommunication sector. We show that the way a government designs the rules of the game has an impact on concentration, competition, and prices. Pro-competition rules reduce prices, but do not hurt the quality of services or investments.

More democratic governments tend to design rule that are more pro-competition, while more politically connected operators are able to distort the rules in their favor, restricting competition. Government intervention has large redistributive effects: U.S. consumers would gain $65bn ($44bn) a year if U.S. mobile service prices were in line with Germany (Denmark).

Authors

Real name: 
Research Member
Purdue University - Krannert School of Management