Strategic interactions in mobile network investment with a new entrant and unobserved heterogeneity

Abstract

I estimate a game of mobile network investment between national incumbents and a new entrant to shed light on the limited success of competition enhancing policies in Canada. I recover player-specific unobserved heterogeneity from bids for spectrum licences to address the unavailability of regressors required to identify incumbents’ responses to the new entrant’s decisions. I find that incumbents benefitting from important economies of density is a plausible explanation for policies’ limitations. I then evaluate the equilibrium effect of subsidizing the new entrant’s transceivers and find that this counterfactual policy increases its investment while only slightly modifying incumbents’.