| Cellular telecommunication in the U.S. is provided by two facilities based carriers in each of the "markets" as defined by the Federal Communications Commission. The signals for cellular telecommunications are transmitted via radio spectrum, which is the main indispensable input. Since radio spectrum is a scarce and rival resource, no additional entry has been allowed. So the number of players in each market is fixed. This market has several characteristics that make its analysis appealing: cellular telecommunication has no close substitutes and is a nearly homogeneous service; some players meet as competitors in several markets; cellular services are regulated in some states.;The objective of this dissertation is twofold, theoretical and empirical. In the theoretical part, tacit cooperation for a duopoly with no entry is modelled. Theoretical models are developed that best represent the characteristics of the U.S. cellular telecommunications duopolies. The approach is game theoretic. The duopolists compete in a nonhomogeneous goods market where the strategic variable is price. The firms have constant marginal costs and consumers' preferences are represented by a quadratic utility function. The conditions needed for tacit cooperative equilibria and the possible pricing outcomes of the duopolies are derived. In addition to the basic nonhomogeneous goods model, information lags, capacity constraints and regulation are imposed to see the implications these restrictions have on the cooperative equilibria and on the pricing strategies.;Based on the theoretical predictions of duopoly behavior, a series of hypotheses are empirically tested on duopoly pricing strategies in response to stated restrictions. Econometric techniques are used to find out the determinants of prices of these duopolies and a reduced-form equation of price is estimated to overcome the lack of data. The theoretical analysis and empirical tests consider no entry which is a case not tested before in the empirical literature. Both the theoretical results and empirical testing do not provide compelling arguments for policy recommendations and the main contribution of this dissertation falls on the field of positive analysis of the cellular telecommunications duopolies. Further data is necessary to provide specific recommendations. |
