Term Paper

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Oligopoly in Telecommunications Industry in Malaysia

By

Siaw Fong Fong
P-GSM0017/14

A Term Paper Submitted for ADW 614 Managerial Economics
In Partial Fulfillment of the Requirements for the Degree of

Master of Business Administration

Prepared for Dr. Tajul Ariffin Masron

Universiti Sains Malaysia
Graduate School of Business
Penang
May 2014

Table of Content

Abstract
Oligopoly & Game Theory
Malaysia Telecommunications History
Current Situation in Telecommunications Industry
The 3 Big Players – Celcom, Maxis, Digi
Price Setting Strategies
Non Price Competitions
The Rise of U-mobile
Conclusion
References

Oligopoly & Game Theory

In an oligopoly market, there are only a handful of players in the market and their behavior is tend to be interdependent (Melvin & Boyes, 2002). It means what Firm A decides to do will affect Firm B’s decision. For instance, the price that Coke sets for its product not only affects Coke’s sales but also the sales for Pepsi. In this paper, we will be talking about the cellular communication companies in Malaysia. Clearly this is an oligopoly market because there is only a few cellular companies in Malaysia namely Digi, Maxis, Celcom and U-mobile. Not only in Malaysia, it happens in most countries. In United States, four wireless providers (AT&T Mobility, Verizon Wireless, T-Mobile, Sprint Nextel) control 89% of the cellular telephone service market. (US Wireless Data Market Q4 2008 and 2008 Update, 2008) Oligopolistic competition may sometimes bring collusion known as cartel. This happened to the cartel for world oil production under OPEC where the international price of oil is controlled. Oligopolies are price setters rather than price takers (Perloff, J, 2008).

Barriers to enter the market exist because of the high cost of entry and the companies need to have the strategic agility and competitive edge to compete with others in the market. Firms in oligopoly



References: Keat, Young, Erfle, Managerial Economics 7th ed, page 460, Pearson 2014 Geoff Riley, Oligopoly and Game Theory (2012) Handphone Users Survey 2012. Retrieved from http://www.skmm.gov.my/skmmgovmy/media/General/pdf/130717_HPUS2012.pdf Emily Smith, 2011, Rules of Attraction in Malaysia

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