IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02286633.html
   My bibliography  Save this paper

Merger Simulation in Mobile Telephony in Portugal

Author

Listed:
  • L. Grzybowski

    (SES - Département Sciences économiques et sociales - LTCI - Laboratoire Traitement et Communication de l'Information - Télécom ParisTech - IMT - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article assesses the unilateral effects on prices 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 of mobile telephony. Given these estimates, we simulate the effects of the merger. We find that the available mobile telephony subscription products are close substitutes. The merger may cause substantial price increases, even in the presence of large cost efficiencies. On average, prices increase by 7–10% without cost efficiencies, and by about 6–10% with a 10% marginal cost reduction.

Suggested Citation

  • L. Grzybowski, 2007. "Merger Simulation in Mobile Telephony in Portugal," Post-Print hal-02286633, HAL.
    • Handle: RePEc:hal:journl:hal-02286633
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
    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.
    3. Barros, Pedro & Cadima, Nuno, 2000. "The Impact of Mobile Phone Diffusion on the Fixed-Link Network," CEPR Discussion Papers 2598, C.E.P.R. Discussion Papers.
    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.
    5. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54, January.
    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. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-276, September.
    8. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-1240, September.
    9. Grzybowski, Lukasz & Pereira, Pedro, 0. "The consumer loss of the minimum duration for mobile telephone calls," Telecommunications Policy, Elsevier, vol. 33(3-4), pages 200-206, April.
    10. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    11. 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.
    12. Jean-Pierre Dube & Guenter J. Hitsch & Peter Rossi, 2006. "Do Switching Costs Make Markets Less Competitive?," 2006 Meeting Papers 514, Society for Economic Dynamics.
    13. Kenneth E. Train & Daniel L. McFadden & Moshe Ben-Akiva, 1987. "The Demand for Local Telephone Service: A Fully Discrete Model of Residential Calling Patterns and Service Choices," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 109-123, Spring.
    14. Rodini, Mark & Ward, Michael R. & Woroch, Glenn A., 0. "Going mobile: substitutability between fixed and mobile access," Telecommunications Policy, Elsevier, vol. 27(5-6), pages 457-476, June.
    15. Asher Tishler & Ron Ventura & John Watters, 2001. "Cellular telephones in the Israeli market: the demand, the choice of provider and potential revenues," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1479-1492.
    16. 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.
    17. Kridel, Donald J. & Rappoport, Paul N. & Taylor, Lester D., 2002. "IntraLATA long-distance demand: carrier choice, usage demand and price elasticities," International Journal of Forecasting, Elsevier, vol. 18(4), pages 545-559.
    18. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, September.
    19. Matthew Shum, 2004. "Does Advertising Overcome Brand Loyalty? Evidence from the Breakfast‐Cereals Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 241-272, June.
    20. V. Brian Viard, 2007. "Do switching costs make markets more or less competitive? The case of 800-number portability," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 146-163, March.
    21. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    22. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    23. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(3), pages 205-217, November.
    24. 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.
    25. Lukasz Grzybowski, 2008. "Estimating Switching Costs in Mobile Telephony in the UK," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 113-132, June.
    26. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 669-691, December.
    27. Avi Goldfarb, 2006. "State Dependence at Internet Portals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 317-352, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grzybowski, Lukasz & Nitsche, Rainer & Verboven, Frank & Wiethaus, Lars, 2014. "Market definition for broadband internet in Slovakia – Are fixed and mobile technologies in the same market?," Information Economics and Policy, Elsevier, vol. 28(C), pages 39-56.
    2. Hawthorne, Ryan & Grzybowski, Lukasz, 2021. "Distribution of the benefits of regulation vs. competition: The case of mobile telephony in South Africa," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    3. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    4. Lucio Fuentelsaz & Juan Pablo Maicas & Yolanda Polo, 2012. "Switching Costs, Network Effects, and Competition in the European Mobile Telecommunications Industry," Information Systems Research, INFORMS, vol. 23(1), pages 93-108, March.
    5. Wellmann, Nicolas, 2019. "Hello . . . Are You Still There? An Empirical Analysis How Market Structure Affects Quality of Mobile Networks," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203579, Verein für Socialpolitik / German Economic Association.
    6. Brito, Duarte & Vasconcelos, Helder, 2023. "Competitive effects of mergers and of spectrum divestment remedies in mobile telecommunication markets," Telecommunications Policy, Elsevier, vol. 47(10).
    7. Srinuan, Chalita & Srinuan, Pratompong, 2023. "A review of recent merger and acquisitions in mobile telecommunications service industry: Substantial issues and implications for policy makers," 32nd European Regional ITS Conference, Madrid 2023: Realising the digital decade in the European Union – Easier said than done? 278019, International Telecommunications Society (ITS).
    8. Lukasz Grzybowski & Pedro Pereira, 2011. "Subscription Choices and Switching Costs in Mobile Telephony," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(1), pages 23-42, January.
    9. Vélez-Velásquez, Juan Sebastián, 2019. "Merger effects with product complementarity: Evidence from Colombia’s telecommunications," Information Economics and Policy, Elsevier, vol. 49(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lukasz Grzybowski & Pedro Pereira, 2011. "Subscription Choices and Switching Costs in Mobile Telephony," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(1), pages 23-42, January.
    2. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
    3. 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.
    4. Lukasz Grzybowski & Chiraz Karamti, 2010. "Competition In Mobile Telephony In France And Germany," Manchester School, University of Manchester, vol. 78(6), pages 702-724, December.
    5. Grzybowski, Lukasz & Nitsche, Rainer & Verboven, Frank & Wiethaus, Lars, 2014. "Market definition for broadband internet in Slovakia – Are fixed and mobile technologies in the same market?," Information Economics and Policy, Elsevier, vol. 28(C), pages 39-56.
    6. Pereira, Pedro & Ribeiro, Tiago & Vareda, João, 2013. "Delineating markets for bundles with consumer level data: The case of triple-play," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 760-773.
    7. Jerome Foncel & Marc Ivaldi & Jrisy Motis, 2008. "An Econometric Workbench for Comparing the Substantive and Dominance Tests in Horizontal Merger Analysis," Working Papers 0833, University of Crete, Department of Economics.
    8. Ricardo Ribeiro & João Vareda, 2007. "Crowding Out or Complementarity in the Telecommunications Market?," Working Papers 07-33, NET Institute, revised Sep 2007.
    9. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    10. Oliver Budzinski & Isabel Ruhmer, 2010. "Merger Simulation In Competition Policy: A Survey," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 277-319.
    11. Bokhari, Farasat A.S. & Mariuzzo, Franco, 2018. "Demand estimation and merger simulations for drugs: Logits v. AIDS," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 653-685.
    12. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    13. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    14. Grzybowski, Lukasz & Liang, Julienne, 2014. "Estimating demand for quadruple-play tariffs: The impact on consumer surplus," 25th European Regional ITS Conference, Brussels 2014 101375, International Telecommunications Society (ITS).
    15. Hawthorne, Ryan & Grzybowski, Lukasz, 2021. "Distribution of the benefits of regulation vs. competition: The case of mobile telephony in South Africa," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    16. Filistrucchi, L. & Gerardin, D. & van Damme, E.E.C. & Keunen, S. & Klein, T.J. & Michielsen, T.O. & Wileur, J., 2010. "Mergers in Two-Sided Markets - A Report to the NMa," Other publications TiSEM f901d1fe-8878-444e-a685-8, Tilburg University, School of Economics and Management.
    17. Gregory S. Crawford & Nicola Pavanini & Fabiano Schivardi, 2018. "Asymmetric Information and Imperfect Competition in Lending Markets," American Economic Review, American Economic Association, vol. 108(7), pages 1659-1701, July.
    18. Bonnet, Céline & Dubois, Pierre & Simioni, Michel, 2004. "Two-Part Tariffs versus Linear Pricing between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets," IDEI Working Papers 370, Institut d'Économie Industrielle (IDEI), Toulouse, revised Apr 2006.
    19. Mathiesen, Lars & Nilsen, Øivind Anti & Sørgard, Lars, 2011. "Merger simulations with observed diversion ratios," International Review of Law and Economics, Elsevier, vol. 31(2), pages 83-91, June.
    20. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.

    More about this item

    Keywords

    L13; L43; L5; L96;
    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02286633. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.