The Analysis of Pricing Strategies in the Mobile Communication Market of Russian Federation

<p style="text-align: justify;">The topic of the work is &quot;The analysis of pricing strategies in the mobile communication market of Russian Federation&quot;. It contains 82 pages, including 12 figures, 16 tables and 3 appendices. 43 sources were used in the research. The sources are both Russian and foreign, and include books, articles, dissertations, electronic resources and databases.</p><p style="text-align: justify;"><strong>Keywords:</strong> pricing strategies, third-degree price discrimination, spatial (regional) price differentiation and competition.</p><p style="text-align: justify;">The question of using of price discrimination occurs in many markets. Research the ability of using of price discrimination, the study of price competition in the markets, pricing policies and market segmentation are held more often. This is evidenced by the large number of papers published in recent years (2011-2014). It proves <strong>the relevance</strong> of the research of price discrimination in the market.</p><p style="text-align: justify;"><strong>The aim</strong> of the work is to explore pricing strategies of players in the mobile communication market of Russian Federation, identify factors that influence the pricing of mobile communication services, and confirm the hypothesis about the presence of third-degree price discrimination in the Russian mobile communication market.</p><p style="text-align: justify;"><strong>The object</strong> of the research is the mobile communications market of Russian Federation.</p><p style="text-align: justify;"><strong>The subjects</strong> of the research are pricing strategies used by mobile operators with application of regional differentiation.</p><p style="text-align: justify;"><strong>The hypothesis</strong> of the work is: there is a third-degree price discrimination in the mobile communication market of Russian Federation.</p><p style="text-align: justify;"><strong>In the first Chapter</strong> the literature review on the subject of mobile communication market and its pricing strategies is done. With the help of the literature review it is easier to examine the market of mobile communications in different countries, and study the notions of the terms &ldquo;price discrimination&rdquo;, &ldquo;pricing strategy&rdquo; and find out the types of pricing strategies.</p><p style="text-align: justify;"><strong>In the second Chapter</strong> the methodology and results of the empirical research are described.</p><p style="text-align: justify;">The description of source data on prices on services of the largest mobile operators in all regions of the country is given. The author&rsquo;s method of calculating of the &ldquo;consumer basket&rdquo; is used for the calculation of the average price of services in every region for every operator. &nbsp;Then an empirical analysis of the prices of mobile communication services is made: the regions, where the mobile communication is the most expensive, and also the regions with the cheapest mobile communication services are identified. In addition, the pricing strategies used by mobile operators are explored. According to the results of the analysis it is identified, that &ldquo;MTS&rdquo; overstates prices; &ldquo;Beeline&rdquo; adheres &ldquo;average price&rdquo; strategy; &ldquo;MegaFon&rdquo; has a wide range of prices, &ldquo;Tele2&rdquo; and &ldquo;SMARTS&rdquo; adhere a strategy of &ldquo;facilitated penetration&rdquo;. Also the assumption that all the companies, in addition to their main pricing strategies, use the differentiation of tariffs by geographical markets segment is confirmed.</p><p style="text-align: justify;">The model of multiple regression of dependence of the average prices of mobile communication services in every region of Russian Federation on the average wage in the region, demand for mobile services and the number of mobile communication companies existing in the regional market is built.</p><p style="text-align: justify;">Obtained coefficients are significant in the model. It means that the selected factors affect the price of the average basket, and the existence of market segmentation is confirmed. A significant negative correlation of prices for services of mobile communication on the number of operators in the region allows speaking about the positive effects of competition, contributing to lower prices.</p><p style="text-align: justify;">The regression models for each of the largest mobile operators are constructed: for &ldquo;MTS&rdquo;, &ldquo;MegaFon&rdquo;, &ldquo;Beeline&rdquo;, and &ldquo;Tele2&rdquo;. It is proved that each of them carries out the segmentation of the market and pursues a strategy of differentiation.</p><p style="text-align: justify;">Then the analysis of competition in the market is made, and also the probability of agreeing between the largest companies in the market with the aim of achieving the maximum of profitability is determined.</p><p style="text-align: justify;">The fact that companies operating in the mobile communication market of Russia implement market segmentation by criteria that affect the elasticity of multiple demand: by the location of the consumer, by consumers&#39; income, by available alternatives in the market, and also by market demand is confirmed in the research. In addition, it is found that the market has high barriers to entry; and that the largest companies control the market and its prices. These factors are the signs of applying the third-degree price discrimination. This confirms the hypothesis about the presence of third-degree price discrimination in the mobile communication market of Russian Federation.</p><p style="text-align: justify;">Thus, the installed differentiation of prices for services of mobile communication in regions can be explained by third-degree price discrimination. Also found that the level of competition in the regions affects the prices of mobile services in the market. Accordingly, measures of increasing the level of competition could reduce the market price.</p>