Entry, Cost Reduction and Competition in The Portuguese Mobile Telephone Industry

Philippe Gagnepain () and Pedro Pereira

No 4993, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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. We show that failure to account for cost reducing effort leads to biased estimates of competition in the industry. 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. Finally, our results suggest that the entry of a third operator in 1998 led to significant cost reductions, and fostered competition.

Keywords: competition; efficiency; empirical analysis; entry; mobile telephony (search for similar items in EconPapers)
JEL-codes: L13 L43 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-eec, nep-ind and nep-net
Date: 2005-04
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Related works:
Journal Article: Entry, costs reduction, and competition in the Portuguese mobile telephony industry (2007)
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