The Influence of Product Quality Differentiation on Telecom Carriers' Collusion

The telecom industry is a typical oligopolistic industry, so telecom carriers are easy to conspire in the course of operation. This article analyzes the influence of product quality differentiation on telecom carrier collusion by constructing a game model. The results show that the critical discount factor that keeps telecom carriers persisting in collusion increases with the decrease of product quality differentiation, that is, the smaller the product quality differentiation is, the harder it is for telecom carriers to adhere to long-term collusion. Conversely, the greater the product quality differentiation is, the greater the risk of a large number of users leaving the network can be when telecom carriers betray the collusion, so they will not easily betray it. Therefore, the product quality differentiation is conducive to the realization and maintenance of telecom carrier collusion. At the same time, telecom carriers that provide different quality products have different incentives for collusion, among which those providing low-quality products are more likely to persist in collusion. What is more, this article also finds that China's telecom industry has great product quality differentiation in the full-service operation, so when telecom carriers pursue the differentiation development of product quality, the government should take corresponding measures to prevent their collusion.

Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion that is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ* strictly larger than δ, the standard criterion that has often been used in applications. In an experimental test we find a strong predictive power of our proposed criterion. For parameter changes where the standard and our criterion predict differently, changes in observed cooperation follow predictions based on δ*. (JEL C72, C73, C92, D81)