Entry, Costs Reduction, and Competition in the Portuguese Telephony Industry
AbstractWe study the e¤ect 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 ine¢ ciency and cost reducing e¤ort. Our results suggest that the entry of a third operator in 1998 lead to signi cant cost reductions, and fostered competition. We also show that failure to account for cost reducing e¤ort leads to biased estimates of competition in the industry. Finally, we also nd that our estimated price-cost margins are similar to hypothetical Nash margins, if rms are patient, and have optimistic beliefs about the industry growth.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/5044.
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Mobile telephony; Entry compettion; Efficiency; Empirical analysis;
Other versions of this item:
- Philippe Gagnepain & Pedro Pereira, 2005. "Entry, Costs Reduction, and Competition in the Portuguese Telephony Industry," Working Papers 05, Portuguese Competition Authority.
- 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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