Competition and regulations in telecommunications with asymmetric firms

This thesis examines competition among asymmetric firms in three different theoretical frameworks. The first study investigates mobile telecommunications, with a strong focus on access charge on off-net calls. Compared to the symmetric cost-based access charge regulation, whilst the asymmetric cost-based access charge regulation facilitates entry, it dampens social welfare if, relative to the incumbent, the new firm is significantly inefficient in cost, distinctly inferior in reputation, and incapable of clearly differentiating its service from the one provided by the established firm. The second study sheds light on a broader framework of infrastructure sharing among telecommunications firms with asymmetric cost structures. Compared to stand-alone investment, co-investment is deemed to be collusive in quality upgrade, and consequently decreases industry output and consumer surplus when infrastructure sharing does not yield a sufficient amount of cost saving. Even though the fully-distributed-cost regulation can stimulate investment in quality upgrade, it undermines incentives to expand consumer bases, leads to price increases, and eventually dampens consumer welfare. The last study captures the competition beyond only one product market where a multi-product firm competes with its single-product rivals by using a variety of bundling strategies that impact on firms’ incentives for quality enhancement in different ways. The pure-bundling strategy can encourage the multi-product firm to invest in quality enhancement when the associated costs are comparatively low and the additional utility from quality enhancement is relatively high, but it certainly discourages the single-product firms from improving quality. In the mixed-bundling case, this outcome inevitably occurs in the more competitive market, and it is likely to be found in the less competitive market when the markets are not too different in competition intensity. Therefore, both bundling strategies threaten consumer welfare when the two markets are significantly different in competition intensity due to the negative influence of the market distortions after tying the two markets.