AT&T wants to buy T-Mobile. In the US, such a deal requires the permission of the FCC and the DOJ. The purpose of such regulatory approval is ostensibly to limit any restraint of trade that may arise from greater concentration of the industry. Some simple models of market power (say, a Cournot model) assume that greater concentration in an industry means higher prices for consumers. Others, like Bertrand models, predict no change in prices. More complex models that account for fixed costs and increasing returns to scale may even predict lower prices for consumers, i.e., price competition is Bertrand, but marginal cost is decreasing over the relevant scale. There may be other factors that the government may look at in terms of whether to approve the merger, but they generally will correlate with consumer prices.
Wireless carriers and the regulatory game tree
Wireless carriers and the regulatory game…
Wireless carriers and the regulatory game tree
AT&T wants to buy T-Mobile. In the US, such a deal requires the permission of the FCC and the DOJ. The purpose of such regulatory approval is ostensibly to limit any restraint of trade that may arise from greater concentration of the industry. Some simple models of market power (say, a Cournot model) assume that greater concentration in an industry means higher prices for consumers. Others, like Bertrand models, predict no change in prices. More complex models that account for fixed costs and increasing returns to scale may even predict lower prices for consumers, i.e., price competition is Bertrand, but marginal cost is decreasing over the relevant scale. There may be other factors that the government may look at in terms of whether to approve the merger, but they generally will correlate with consumer prices.