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Entry, Cost Reduction and Competition in The Portuguese Mobile Telephone Industry

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  • Pereira, Pedro
  • Gagnepain, Philippe

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. We show that failure to account for cost reducing effort leads to biased estimates of competition in the industry. 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. Finally, our results suggest that the entry of a third operator in 1998 led to significant cost reductions, and fostered competition.

Suggested Citation

  • Pereira, Pedro & Gagnepain, Philippe, 2005. "Entry, Cost Reduction and Competition in The Portuguese Mobile Telephone Industry," CEPR Discussion Papers 4993, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4993
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    Cited by:

    1. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
    2. Kuroda, Toshifumi & Baquero Forero, Maria del Pilar, 2017. "The effects of spectrum allocation mechanisms on market outcomes: Auctions vs beauty contests," Telecommunications Policy, Elsevier, vol. 41(5), pages 341-354.
    3. Georges V. Houngbonon & Francois Jeanjean, 2019. "Investment and market power in mobile mergers," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 65-81, March.
    4. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
    5. Li, Yan & Pittman, Russell, 2012. "The proposed merger of AT&T and T-Mobile: Are there unexhausted scale economies in U.S. mobile telephony?," MPRA Paper 39043, University Library of Munich, Germany.
    6. de Mesnard, Louis, 2011. "More firms, more competition? The case of the fourth operator in France's mobile phone market," International Journal of Production Economics, Elsevier, vol. 130(2), pages 186-195, April.
    7. Ruiz-Moreno, Felipe & Mas-Ruiz, Francisco J. & Sancho-Esper, Franco M., 2021. "Strategic groups and product differentiation: Evidence from the Spanish airline market deregulation," Research in Transportation Economics, Elsevier, vol. 90(C).
    8. Omamo, AmosO. & Rodrigues, Anthony J. & Muliaro, Wafula, 2019. "Kenya's vision 2030: Modelling technology usage and the economy," Technology in Society, Elsevier, vol. 59(C).
    9. Pearcy, Jason & Savage, Scott J., 2015. "Actual and potential competition in international telecommunications," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 94-105.
    10. Yan Li & Russell Pitman, 2012. "The proposed merger of AT & T and T-mobile: Are there unexhausted scale economies in US mobile telephony?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2012-07, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    11. Eric S. Chou & Meng-Yu Liang & Cheng-Tai Wu, 2022. "Reorganizing a partnership efficiently," Review of Economic Design, Springer;Society for Economic Design, vol. 26(2), pages 233-246, June.
    12. Baquero, Maria & Kuroda, Toshifumi, 2015. "Analysis of the role of international network effects on the diffusion of second and third generation mobile communication networks," 26th European Regional ITS Conference, Madrid 2015 127126, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    Mobile telephony; Entry; Competition; Efficiency; Empirical analysis;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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