The Swedish Gambling Monopoly : Impacts from Internet competition on Svenska Spel’s prices and advertising expenses

With the fast progress of the Internet the Swedish gambling monopoly is no longer able to control the market. Gambling companies licensed in foreign countries can compete with Svenska Spel via the Internet offering lower prices. The authors investigated whether the competition has lead Svenska Spel to lower their prices. Focus has been put on the years 2000-2006 and on Svenska Spel’s sports betting section Oddset since competition here is high. To help analysing Svenska Spel’s pricing behaviour the dynamic limit pricing model of optimal pricing when faced with entry was used. The effect on Svenska Spel´s advertising expenditures following the competition was also investigated. For this part A dynamic model of advertising and market shares was used. The analysis indicates that when the number of firms on the market increased, prices decreased and Svenska Spel’s advertising expenses increased