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Entry, Costs Reduction, and Competition in the Portuguese Mobile Telephony Industry

  • Philippe Gagnepain

    ()

    (Departamento de Economía - Universidad Carlos III de Madrid)

  • Pedro Pereira

    (Autoridade da Concorrência - Portugal)

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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Paper provided by HAL in its series Post-Print with number hal-00622837.

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Date of creation: 2007
Date of revision:
Publication status: Published, International Journal of Industrial Organization, 2007, 25, 461-481
Handle: RePEc:hal:journl:hal-00622837
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00622837/en/
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  8. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
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  13. GRUBER, Harald & VERBOVEN, Frank, . "The evolution of markets under entry and standards regulation - The case of a global mobile telecommunications," Working Papers 1999038, University of Antwerp, Faculty of Applied Economics.
  14. Foreman, R Dean & Beauvais, Edward, 1999. "Scale Economies in Cellular Telephony: Size Matters," Journal of Regulatory Economics, Springer, vol. 16(3), pages 297-306, November.
  15. S.A. Lippman & R.P. Rumelt, 1982. "Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 418-438, Autumn.
  16. Philip M. Parker & Lars-Hendrik Roller, 1997. "Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 304-322, Summer.
  17. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
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