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We propose a model of Bertrand competition in which consumers choose firms based on prices and qualities. Service quality depends on congestion, which is a function of capacity and output. We first present theoretical properties of the model. Next, we calibrate the model to the wireless industry and use it to evaluate the impacts of changes in spectrum allocation on consumer welfare and profits. Simulations of the model show that when one firm acquires more spectrum, consumer welfare at all firms increases due to congestion externality effects. We find that a transfer of spectrum from one firm to another can either raise or lower consumer welfare at the firms not involved in the transaction, again due to externality effects. Where it is possible to compare the results of our model to the wireless industry, they are consistent with the data. We also explore some possible effects of the upcoming 2016 spectrum auctions.

We characterize screening for collusion as a problem of inference whose essential elements include competitive null hypothesis (H0), a collusive alternative (H1), and an empirical indicator (X) to differentiate between them. Using this framework, we review the theoretical and empirical efforts to design screens and find that screens fail for one of three reasons: (i) the empirical indicator cannot distinguish between H0 and H1; (ii) H0 is not indicative of competition or H1 is not indicative of collusion; or (iii) the world is neither H0 nor H1. The often under-appreciated, second and third conditions imply that before using a screen, the practitioners should make sure that the industry in question "fits" the theoretical model or assumptions on which the screen is based.

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