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Article Title:
Modeling the Effects of Oligopolistic Behaviour of Mobile Telecommunication Network (MTN) and Tigo in the Telecommunication Market: The Ghanaian Experience
by Andrews Kingsley Doku; Benjamin Appiah-Kubi; and Appiah Takyi S

Abstract:
Telecommunication industry in Ghana was liberalized in 1994 and this has prompted a lot of telecommunication companies to compete in the small market in Ghana. The two dominant firms are MTN and Tigo that have captured about 80% of the subscription base in the telecommunication market in Ghana. The tendency for these two dominant firms to establish a Nash Equilibrium where it is possible for them to reduce output and increase price in order to maximize profit is very high and the study follows this using their reaction functions and calculus approaches. The study considered the oligopolistic behavior of the two dominant firms using the Cournot duopoly model with emphasis on the reaction functions and calculus to establish their equilibrium. The residual demand of each firm was estimated to help in the graphical illustration of the Cournot duopoly equilibrium. The mathematical version of the equilibrium model was derived using calculus. Data for the work included document, archival records and interviews from the telecommunication companies. Using the reaction functions and the calculus approaches, the results indicate that the profit maximizing values of MTN and Tigo will lead to establishing Nash Equilibrium output levels. The potential theoretical implications are that, recognizing their mutual interdependence, the two firms are likely to agree to act in unison in order to maximize total profit in the industry. Both firms will do that by using self-imposing strategies to reduce output, raise the price and increase their profit.

Keywords: cournot duopoly, residual demand, optimum output, reaction functions, nash equilibrium

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