Thursday, October 13, 2011

Texting Competition

The New York Times has an article on the impact that new texting competitor's may have on cellular carriers. It is an interesting way to think about how close substitutes (various text suppliers) impact the price - here for texts. We will be looking at the Bertrand product differentiation model soon, and this is a good example of how prices will converge to marginal costs.

If you missed this - the article claims that the cost of sending a text is 0.33 cents and that can result in a greater than 4000% mark-up.

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