CEEAplA Working Paper Series 2008
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Browsing CEEAplA Working Paper Series 2008 by Author "Cabral, Ricardo"
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- Evaluating a mobile telecommunications merger in PortugalPublication . Andini, Corrado; Cabral, RicardoThis paper evaluates the impact of the proposed Optimus-TMN mobile telecommunications merger in Portugal. The results suggest that, if the merger would have taken place, the average market profit margin would have increased by 11.6 percentage points and the average market price would have increased by 3.8%. As a consequence, the average marginal cost would have decreased by 14.9%, and welfare would have increased by €163.3mn per year, a gain entirely captured by the producers. Moreover, the merger would have resulted in a large transfer of surplus from consumers to producers, to the tune of €99.5mn per year. The conclusion is that, while the merger could have been authorized on efficiency grounds, such authorization should have been accompanied by strict retail price-cap merger remedies.
- Monopoly behavior with learning effects and capacity constraintsPublication . Cabral, RicardoUsing a model motivated by the adoption of new process technology in the semiconductor industry, this paper analyzes dynamic monopoly behavior with endogenous learning-by-doing and capacity constraints. The analysis shows that the monopoly invests in learning early-on by producing at higher rates than the static optimum. In addition, it invests in more manufacturing capacity than the static optimum in order to be able to learn faster. Furthermore, in order to prevent prices from falling too rapidly it leaves some capacity idle as the technology matures and learning externalities becomes negligible. Finally, the monopoly may set price below marginal cost when demand is large or growing rapidly.
- A test of collusive behavior based on incentivesPublication . Cabral, RicardoThis paper proposes a novel collusion test based on the analysis of incentives faced by each firm in a colluding coalition. In fact, once collusion is in effect, each colluding firm faces the incentive to secretly deviate from the agreement, since it thereby increases its profits, although the colluding firms’ joint profit decreases. Thus, in a colluding coalition each firm has marginal revenues, calculated with Nash conjectures, which are larger than its marginal costs. The collusion test is based on the rejection of the null hypothesis that the firm marginal revenues with Nash conjectures are equal to or less than its marginal costs.