An Inspection of Changes in Market Structure

Despite the numerous efforts to foster market competition, the rise of market power is pervasive. Recent empirical evidence shows that the evolution of markups has been marked by a steady growth rate over the last decades (De Loecker and Eeckhout, 2018; De Loecker, Eeckhout and Unger, 2018). This has originated an extensive debate and it is likely to dominate the economic research for years to come. The natural question to raise is: What are the sources of market power? One explanation is market structure, defined as the number of competitors in the market. This research project investigates both the determinants and the impact of market structure using the case of the telecommunications industry. More specifically, the key objective of my research project is to explore market structure by analyzing how the entry of new carriers affects the diffusion of telecom services, and how the strategic behavior of the companies may prevent the entry of potential competitors. For this purpose, the project (i) estimates an empirical demand and pricing model to assess the effect of entry on broadband adoption, (ii) proposes a novel estimation method to examine the use of bundling as an entry deterrence strategy, and (iii) studies the influence of common ownership links on the likelihood of market entry in the telecom industry.