Microeconomics of Mobile Networks
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Added on 2020-04-29
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Microeconomics 1 Microeconomics Entry barriers in Mobile Network Market: 4 Limited availability of frequency spectrum becomes barrier to entry: 4 Switching costs of customer as entry barrier: 5 Mobile operator companies exploit consumers easily: 5 Is it possible that rates will fall much in the future without commissioner’s action? 11 References 13 Entry barriers in Mobile Network Market According to Premkumar and Rajan, (2012), the prices of services become efficient in the case of low entry barriers in the market. Bengt
Microeconomics of Mobile Networks
Added on 2020-04-29
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Microeconomics 1Microeconomics
Microeconomics 2Table of ContentsEntry barriers in Mobile Network Market:......................................................................................4Limited availability of frequency spectrum becomes barrier to entry:........................................4Switching costs of customer as entry barrier:..............................................................................5Mobile operator companies exploit consumers easily:....................................................................5Is it possible that rates will fall much in the future without commissioner’s action?.....................7Case2: Uranium case.......................................................................................................................8The short-run demand for uranium is inelastic:...........................................................................8Long gestation period and its impact on short and long runs demand for uranium:....................9Case3: Middleman commissions in international business...........................................................10Presence of middlemen affects the operation of competitive markets:.....................................10Effect of decreasing middleman commissions on the buyer and seller surpluses:....................10Case 4: Elevator and economies of scale and economies of scope:..............................................11Whether to double the service personnel, in case of adding double amount of elevator?.........11Does the example in (a) illustrate economies of scale or scope?...............................................11Examining economies of scope for a contractor to maintain both escalators and elevators?....11References......................................................................................................................................13
Microeconomics 3Entry barriers in Mobile Network MarketAccording to Premkumar and Rajan, (2012), the prices of services become efficient in the caseof low entry barriers in the market. In any business this is the unset rule that in the absence ofhealthy competition the market leader suppose to add higher prices for its products and services.The mobile network companies are also not exception for this concept. In most of the EEAcountries, it is determined that 50% of market share is acquired by only one company. Thisclearly indicates the lack of competition and the competitors who want to compete would notable to get marginal cost benefit which they can provide to customers. In such imbalance anddominant market, it is difficult to have entry barriers. The new entrant is difficult to come in themobile operating network market through which pricing policies can be disciplined. Bengtsson, et al, (2011) specified two reasons which shows that entry of new company in mobilenetwork market is not easy; 1) frequency spectrum availability is limited 2) possibility ofswitching of customer in case of poor service or due to other reasons, for example, customer canswitch their network in case of finding cheaper and more prominent network.
Microeconomics 4Limited availability of frequency spectrum becomes barrier to entry: Access to the spectrum is integral part to operate mobile telephone network and incase of itslimited available it become difficult to enter into this market (Porter and Heppelmann, 2014).The required access to frequency spectrum and its rights are provided by the country’sGovernment and have the jurisdiction for it. Hence, the mobile networks are limited in amountand Government issues limited amount of license due to the state of technology. This is thequestionable because it is identified that the number of mobile phone network does not guaranteethe fair competition in the market. This increase the dominance of only one company in themarket, reduce the competition chances and increases the chances of customer exploitationthrough excessive call and roaming charges. Switching costs of customer as entry barrierAccording to Bohari, et al., (2017), the main behavior or characteristics of customer are they canswitch to other options or company in the market for the sake of monetary and service benefit.Price advantage provided by one company is the main reason behind the customer switching. Ifcustomer gets the similar benefit in fewer prices by one mobile operator then there is highestprobability of switching from one network to another network. Number of options is available tothe customer through which they can change the mobile network. They can port their number inmost favorable and cheap pricing network. This is good for creating healthy competition in themarket but at the same time it creates barriers for entry. Presence of mobile number portability(MNP) option can decrease the costs of switching which may create chances for new entry in themarket (Dabhilkar 2011). If new entrants are providing the best services at the low price thenthey are likely to get positive reply from the customers. This will also help to generate thecompetition in dominating mobile phone network market.
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