A game theoretic analysis of South Africa's cellular information and communication technology sector

Abstract

A game theoretic approach of South Africa's cellular information and communication sector The "new economy" has become a reality for South Africa. An economy driven by factors such as globalisation and technology. If South Africa wish to partake in the benefits of globalisation the promotion of cellular information and communication technology (ICT) may be a vital part of any economic development strategy. This is because the internalisation of services is at the core of economic globalisation. Service industries such as communication and transport technologies provide links between geographically dispersed economic activities and thus play a fundamental role in the growing interdependence of markets and production activities across nations. The deregulation of South Africa 's cellular ICT sector has lead to the licensing of a third network operator. A game theoretic approach was used to determine what effect the entrance of a third cellular network provider will have on the South African cellular information, communication and technology (ICT) sector and the sector's contribution to economic development. The problem managers of firms (in monopolistic market structures) have is how to use their market power most effectively. They must decide how to set prices, choose quantities of factor inputs, and determine output in both the short and long run to maximise the firm 's profit. Managers of firms with market power have a harder job than those who manage perfectly competitive firms. Managers of firms with monopolistic power must also obtain information about the characteristics of demand. Even if they set a single price for the firm 's output, they must obtain at least a rough estimate of the elasticity of demand to determine what that price (and corresponding output level) should be. This study determines that the traditional way of modelling oligopolistic behaviours does not adequately capture the multitude of dynamic interactions which could arise in an oligopolistic market setting and that one approach to this problem involves the use of game theory, which has the added virtue of reinforcing our understanding of oligopol istic interdependence.