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Overview:
The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. This paper estimates the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, it devise an econometric procedure that allows to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. The semiparametric maximum score estimator controls for consumers' heterogeneous preferences for carriers, handsets and minutes of calling time. The authors find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers.
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| Format: | Size: | 268 KB | |
| Date: | Mar 2007 | ||
| Pages: | 36 |
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