Competition in Network Industries: Evidence from the Rwandan Mobile Phone Network
This paper analyzes the potential for competition policy to affect welfare and in- vestment in a network industry. When a network is split between competitors, each internalizes less network effects, but may still invest to steal customers. I structurally estimate the utility of adopting a mobile phone from subsequent usage, using transac- tion data from nearly the entire Rwandan network. I simulate the equilibrium choices of consumers and network operators. Adding a competitor earlier could have reduced prices and increased incentives to invest in rural towers, increasing welfare by the equivalent of 1% of GDP.
Keywords: network effects, infrastructure, information technology
JEL Codes: O33, L96, O180, L51