... MNP intensified competition leading to an increase in consumer surplus. On average, the introduction of MNP decreased price by 7.9%.
Thursday, May 30, 2013
Switching Costs and Competition
How resistant to switching phone carriers would you be if you had to change your phone number when you changed your carrier? If a lot, then carriers can raise price without as much fear that you will abandon them for a competitor. These switching costs make demand less elastic. In a new working paper, "The Impact of Mobile Number Portability on Price, Competition and Consumer Welfare," Cho, Ferreira, and Telang show that:
MNP policies were introduced despite strong objections from carriers and hastened the erosion of profits in the effected markets.