Empirical Study On Competitive Behavior And Market Performance Of Mobile Telecommunication Industrv In China

The mobile telecommunication industry of our country has experienced a dramatic change over the last25years. It had0.97billion subscribers until Nov.2011which ranked as the no.1around the world even since2004. There was just one operator in this market before1994until the entrance of Chinaunicom. It introduced the third one, Chinatelecom, in2008. The basic judgment of the market structure is that it’s an oligopoly market. The pricing mechanism changed from monopoly pricing to government pricing, and then to market pricing. Price competition plays an important role in the development of this industry’. The ARPU of Chinamobile decreased from266CNY in the first quarter of2000to70CNY in the first half of2011. which fell by73.7%. And the ARPU of Chinaunicom jumped from115in2000to46.8in the first half of2011, which fell by59.3%.According to oligopoly theory, firms are willing to cooperate, or collude, to control market price or output to earn high profit when the number of firms on this market is small. On the other hand, one firm can earn more profit by change its output secretly when other firms obey their agreement. That is to say, every single firm’s decision can change market price and then other firm’s output and profit. So, every firm should be careful of market price and the output of the others,In aim of studying the competitive behavior and market power of mobile telecommunication industry of our country, I built a model of competitive behavior of this market on the theoretical basis of new empirical industry organization(NEIO), and then estimate the simultaneous equation model using3SLS. The conclusion rejects the null hypothesis that there is obvious collusion in the market but accept the alternative that thehole market is a Cournot one. The parameter of competitive behavior is0.2277, and the Lerner index is0.2938, that is to say, the price is41%higher than the marginal cost in this industry, which means high market power. Besides studying the competitive behavior. I also test the collusion hypothesis of Harvard School against the effective hypothesis of Chicago School using the SCP paradigm. The outcome of the study of competitive behavior will play a very important role in this part. Using the sample of the last decade of the industry, I found that the effective hypothesis is more suitable for our country’s mobile telecommunication industry. After doing these, I gave several policy advices concerning further reform of this industry. The first one concerns the deregulation of this industry while the second one is to strengthen the monitoring and punishment of anti-competitive behavior. The last one is to implement asymmetric regulation.