The Dynamic Effects of Competition on Investment

The Case of the European Mobile Communications Industry

Bibliographic Data

ID13106206
AuthorsKalvin Bahia (corresponding author), Pau Castells (0000-0002-9604-7844)
Year2023
Volume13
Pages249-309
Publication date2023-12-01
Open AccessYes
TypeARTICLE
VenueJournal of Information Policy (JOURNAL)
Journal identifiersISSN: 2381-5892 • E-ISSN: 2158-3897
PublisherThe Pennsylvania State University Press (PUBLISHER)
DOI10.5325/jinfopoli.13.2023.0012
OpenAlexW4390141348
LanguageEN
References cited23

We evaluate the impact of competition on investments in Europe’s mobile communications market during the 2011 to 2021 period. There are stark and sustained differences in market outcomes between three- and four-player markets in Europe, and economic theory suggests these could be partly explained by the dynamic effects of competition on the ability and incentives to invest by market players. We find strong evidence that market concentration in Europe is below optimal levels that would maximize investments, especially in four-player markets. The dispersion of fixed costs and assets among a greater number of players can result in diseconomies of scale and a less efficient use of resources. We also find evidence that investment incentives to improve quality and innovate are lower in markets with lower concentration indices and profit margins

Business · Competition (biology · Diseconomies of scale · Economics · Economies of scale · Incentive · Industrial organization · Investment (military · Market competition · Market concentration · Market economy · Microeconomics · Profit (economics · Proxy (statistics · Consumer Market Behavior and Pricing · Corporate Finance and Governance · ICT Impact and Policies

Tools

Open DOIOpen Access