Michael Sinkinson, Business Economics PhD
Thesis Chair: Ariel Pakes
Dissertation Title: The Industrial Organization of Mobile Telecommunications
Job Market Paper: Pricing and Entry Incentives with Exclusive Contracts: Evidence from Smartphones
This paper studies the decisions of upstream and downstream firms to enter into exclusive contracts with an application to mobile telecommunications. Why would a smartphone manufacturer choose to distribute its product through only one carrier, and which carrier would value such exclusivity the most? I develop a model to show that different demand elasticities for upstream and downstream firms can create an incentive for exclusive contracts when downstream demand is sufficiently elastic, and that different elasticities among downstream firms resulting from vertical differentiation can lead to different valuations for the exclusive contract. I estimate the relative elasticities of smartphone and carrier demand using simulation and MCMC methods on a dataset of consumer purchase decisions over 2008- 2010 to measure the magnitudes of the competing forces. Counterfactual simulations show that Apple's exclusivity increased entry incentives for Android handset makers by approximately $1B, and that accounting for elasticity, AT&T's value of exclusivity with Apple exceeded the value of other carriers by several billion dollars.
