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Simulation of Merger in Mobile Telephony in Portugal

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Author Info
Lukasz Grzybowski () (University of Alicante)
Pedro Pereira () (Autoridade da Concorrencia, Portugal)

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Abstract

This article assesses the unilateral e ects of a merger in the Portuguese mobile telephony market. We use aggregate quarterly data from 1999 to 2005 and a nested logit model to estimate the price elasticities of demand and the marginal costs of subscription to mobile services. We nd that mobile services provided by the rms in the market are close substitutes. Based on these estimates, we simulate the e ects of the merger. The merger may result in substantial price increases, even in the presence of large cost eciencies.

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Publisher Info
Paper provided by NET Institute in its series Working Papers with number 06-22.

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Length: 26 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
Handle: RePEc:net:wpaper:0622

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Related research
Keywords: mobile telephony; merger simulation; network e ects; lock in; nested logit;

Find related papers by 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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References listed on IDEAS
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  1. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Doganoglu, Toker & Grzybowski, Lukasz, 2007. "Estimating network effects in mobile telephony in Germany," Information Economics and Policy, Elsevier, vol. 19(1), pages 65-79, March. [Downloadable!] (restricted)
  3. Cadima, Nuno & Pita Barros, Pedro Luis, 2000. "The Impact of Mobile Phone Diffusion on the Fixed-Link Network," CEPR Discussion Papers 2598, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Okada, Yosuke & Hatta, Keiko, 1999. "The Interdependent Telecommunications Demand and Efficient Price Structure," Journal of the Japanese and International Economies, Elsevier, vol. 13(4), pages 311-335, December. [Downloadable!] (restricted)
  5. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-40, September. [Downloadable!] (restricted)
    Other versions:
  6. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
  7. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer. [Downloadable!] (restricted)
  8. Gagnepain, Philippe & Pereira, Pedro, 2005. "Entry, Cost Reduction and Competition in The Portuguese Mobile Telephone Industry," CEPR Discussion Papers 4993, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer, vol. 15(3), pages 205-217, November. [Downloadable!] (restricted)
  10. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June. [Downloadable!] (restricted)
  11. Pedro Pereira & José C. Pernías-Cerrillo, 2005. "The Diffusion of Cellular Telephony in Portugal before UMTS: A Time Series Approach," Working Papers 08, Portuguese Competition Authority. [Downloadable!]
  12. 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. [Downloadable!]
    Other versions:
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