Pricing and Entry Incentives with Exclusive Contracts: Evidence from Smartphones

65 Pages Posted: 8 Feb 2014

Date Written: January 2014

Abstract

I study the implications of exclusive contracts for smartphones. Theory models indicate that lower demand elasticities for handsets relative to wireless networks could lead to exclusive contracts maximizing joint profits of the contracting parties. I estimate smartphone and carrier demand on a detailed monthly market-level dataset of US consumer decisions over 2008-2010. Counterfactual simulations show that AT&T had the highest willingness to pay for exclusivity with Apple only after accounting for equilibrium price effects, and that this exclusivity increased entry incentives for rivals. A bargaining analysis shows that Apple negotiating with competing carriers was essential to the observed market structure.

JEL Classification: L11, L14, L96

Suggested Citation

Sinkinson, Michael, Pricing and Entry Incentives with Exclusive Contracts: Evidence from Smartphones (January 2014). Available at SSRN: https://ssrn.com/abstract=2391745 or http://dx.doi.org/10.2139/ssrn.2391745

Michael Sinkinson (Contact Author)

Yale SOM ( email )

127 Wall Street
New Haven, CT 06511
United States

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