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Entry, costs reduction, and competition in the Portuguese mobile telephony industry

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  • Gagnepain, Philippe
  • Pereira, Pedro

Abstract

We study the effect of entry on costs and competition in the Portuguese mobile telephony industry.\ We construct and estimate a model that includes demand, network, and cost equations. The latter accounts for inefficiency and cost reducing effort. Our results suggest that the entry of a third operator in 1998 lead to significant cost reductions, and fostered competition. We also show that failure to account for cost reducing effort leads to biased estimates of competition in the industry. Finally, we also find that our estimated price-cost margins are similar to hypothetical Nash margins, if firms are patient, and have optimistic beliefs about the industry growth.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 25 (2007)
Issue (Month): 3 (June)
Pages: 461-481

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Handle: RePEc:eee:indorg:v:25:y:2007:i:3:p:461-481

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Web page: http://www.elsevier.com/locate/inca/505551

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  14. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
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Cited by:
  1. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
  2. Pedro Pereira & Tiago Ribeiro, 2006. "The Impact on Broadband Access to the Internet of the Dual Ownership of Telephone and Cable Networks," Working Papers 17, Portuguese Competition Authority.
  3. Russell Pittman, 2012. "The Proposed Merger of AT&T and T-Mobile: Are There Unexhausted Scale Economies in U.S. Mobile Telephony?," EAG Discussions Papers 201202, Department of Justice, Antitrust Division.

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