DP11794 Political Determinants of Competition in the Mobile Telecommunication Industry

Author(s): Mara Faccio, Luigi Zingales
Publication Date: January 2017
Keyword(s): Antitrust, capture, political economy
JEL(s): D72, L11, P16
Programme Areas: Financial Economics, Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11794

We study how political factors 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 regulation reduces prices, but does not hurt quality of services or investments. More democratic governments tend to design more competitive rules, 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 a year if U.S. mobile service prices were in line with German ones and $44bn if they were in line with Danish ones.