Question

Which market model appears to In spring 2009, the U.S. wireless telecommunications industry hoped that mergers among firms would decrease the number of rivals and eliminate cutthroat competition. However, the wireless carriers faced challenges from new technologies and a rush of new entrants into the market. Unlike their counterparts in the traditional phone industry, wireless companies never enjoyed a period of monopoly status. Please explain the behaviour described in more detail

Answer 1

In spring 2009, the market seems to be an oligopoly where firms are independent to set their own price and there is fierce competition between the firms. Mergers between some of these firms is expected to reduce the number of firms in the market, thereby leading to elimination of cutthroat competition.

However, after mergers of some of these firms, technology in the industry changed and there were new entrants in the market, but they couldn't enjoy a period of monopoly status like the firms that were already making monopoly profits after mergers.

It is quite understandable that after mergers, the firms were able to make monopoly profits, which means after mergers the market structure had changed from oligopoly to monopoly or duopoly with collusion. However, it couldn't contunue for too long as entry of new entrants changed the market structure again to oligopoly with competition.