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Simulation of Merger in Mobile Telephony in 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 e ciencies.

Suggested Citation

  • Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
  • Handle: RePEc:net:wpaper:0622
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    References listed on IDEAS

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    1. 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.
    2. Gagnepain, Philippe & Pereira, Pedro, 2007. "Entry, costs reduction, and competition in the Portuguese mobile telephony industry," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 461-481, June.
    3. 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.
    4. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-1240, September.
    5. 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.
    6. 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.
    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.
    8. 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.
    9. 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.
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    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. 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.
    3. 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.

    More about this item

    Keywords

    mobile telephony; merger simulation; network e ects; lock in; nested logit;

    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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