Abstract

http://ssrn.com/abstract=1013619
 
 

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The Impact of Entry on Prices and Costs


Rosa M. Abrantes-Metz


Global Economics Group, LLC; New York University - Leonard N. Stern School of Business - Department of Economics

Pedro Pereira


Autoridade da Concorrência

September 2007


Abstract:     
In this article, we propose a very simple methodology to evaluate the impact on prices and costs of the entry of a firm in a market, and apply it to the entry of a third firm in the Portuguese mobile telephony industry. Using quarterly firm level data, we characterize the evolution of the firms' prices and costs. We argue that the more plausible explanation for the behavior of these variables is the competition hypothesis. The entry of the third firm forced the other two firms to reduce their prices. The decrease in their profit margins led the two firms to improve their internal efficiency. As a consequence, their costs fell.

Number of Pages in PDF File: 18

Keywords: Entry, Competition, Mobile Telephony, Prices, Costs

JEL Classification: L13, L96

working papers series





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Date posted: September 18, 2007  

Suggested Citation

Abrantes-Metz, Rosa M. and Pereira, Pedro, The Impact of Entry on Prices and Costs (September 2007). Available at SSRN: http://ssrn.com/abstract=1013619 or http://dx.doi.org/10.2139/ssrn.1013619

Contact Information

Rosa M. Abrantes-Metz (Contact Author)
Global Economics Group, LLC ( email )
22 Cortlandt Street
Suite 1600
New York, NY 10007
United States
(917) 499-4944 (Phone)
HOME PAGE: http://www.globaleconomicsgroup.com
New York University - Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
Pedro Pereira
Autoridade da Concorrência ( email )
1050-138 Lisboa
Portugal
Feedback to SSRN


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