CEEAplA Working Paper Series 2008
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- 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.
- Some general results about the optimal timing of relocationPublication . Azevedo-Pereira, José; Couto, Gualter; Nunes, CláudiaIn this paper we derive general results concerning the optimal switching level in the problem of the optimal relocation policy for a firm that faces two types of uncertainty: one about the moments in which new (and more efficient) sites will become available; and the other regarding the degree of efficiency improvement inherent to each one of these new, yet to be known, potential location places. In particular, we note that the optimal switching level depends on the distribution of the degree of efficiency improvement only through an expected value. Impacts on the final results driven by the characteristics of the firm’s original location site, the market environment and the way in which risk is modelled are studied numerically. The overall results are in line with economic intuition.
- 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.
- Future entrepreneur’s profilePublication . Silva, Francisco; Couto, Gualter; Coelho, HugoGiven that entrepreneurship plays a key role in the development of a country’s economy, governments should stimulate entrepreneurial orientation, particularly among youngsters in their formative years; schools must play a pertinent role in the promotion and support of these capacities. Indeed, the European Commission advises that schools foster such skills. In this context, we apply a frame to screen school populations in the Azores Islands, Portugal, for prospects of entrepreneurship and to study the profiles of those who noticeably show entrepreneurial orientations. Knowing the ideal combination of personality traits that foretell young entrepreneurs, schools can develop the syllabuses that are best aimed at promoting entrepreneurship and increasing the capacities of those who prove to be entrepreneurially oriented. This work leads to the following main findings: first, that one quarter of all senior students in high school in the Azores Islands bears prospects for entrepreneurship and, second, this same group shows a well-defined psychological profile that may vary depending on one’s willingness to expend effort.
- Labor market regulations and trade patterns : the panel data analysis within a modified ricardian settingPublication . Uzagalieva, AinuraThe paper focuses on the question of how labor market regulations can affect a country’s competitive position in international trade and international trade patterns. The analysis shows that differences in labor market flexibility between countries affect their competitive positions in international markets and can serve as an independent cause of international trade. It is argued that an increase in labor market flexibility may change the relative price of goods within the country making it more competitive in international markets for commodities with uncertain demand. Changes in relative prices can alter countries’ comparative advantage and thus international trade patterns. Furthermore, it is shown that due to the differences in relative prices resulting from different labor market regulations, international trade between countries can be observed even if they are identical in all respects (e.g., labor productivity and production technology). Data reveal that a country with a more flexible labor market has comparative advantage in, and tends to export, goods with more variable demand (e.g., fashionable clothes, seasonal toys), while a country with a more rigid labor market has a comparative advantage in, and tends to export, commodities with more stable demand.
- 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.
- Basel II : operational risk measurement in the portuguese Banking sector and an evaluation of the quantitive impactsPublication . Couto, Gualter; Bulhões, KevinThe present work is aimed at understanding the general notion and origin of the New Basel Accord, which intends to attain international bank stability, emphasizing the convergence between regulatory capital and economic capital, applying its risk sensitive methodologies. This work focuses on one of the principal novelties of Basel II – operational risk and its respective methodologies for calculating minimum capital requirements. The New Capital Accord encourages financial institutions to gradually evolve from basic to sophisticated methodologies. Institutions using more sophisticated methods will be rewarded by deductions on the capital allocated for the calculation of the capital ratio. The methodologies associated to operational risk will be applied to a group of national banking institutions. These methodologies are referred to in Pillar I of the New Capital Accord: (i) basic indicator approach, (ii) the standardized approach and (iii) the alternative standardized approach. The purpose of this practical application is to evaluate and quantify the impact due to the introduction of Basel II.
- Real Options Valuation : an application to the portuguese real estate marketPublication . Oliveira, Carla; Couto, Gualter; Pimentel, PedroThe contribution of real options analysis on the valuation of Portuguese undeveloped building sites is significant on the decision making regarding the apartment-buildings construction. Using the options model developed by Quigg (1993), and including the necessary readjustments for the Portuguese market, it was found that the scale price elasticity parameter and construction expenditures’ elasticity of scale parameter had a strong impact on building sites’ values. The empirical analysis revealed that the option to defer adds value to undeveloped building sites’ valuations. This fact cannot be ignored when deciding upon an investment’s implementation.
- Suporte à Decisão em Tecnologias de Comunicação : um caso com utilização de metodologias OLAP e Data MiningPublication . Alfaro, Paulo J.; Mendes, Armando B.; Ferreira, AiresEste artigo descreve um Sistema de Apoio à Decisão capaz de fornecer informação precisa e de qualidade sobre as comunicações na Electricidade Dos Açores (EDA). A decisão imediata a apoiar consistia em saber se as comunicações entre ilhas deveriam passar para tecnologias Voice over IP (VoIP), um serviço actualmente contratado a uma empresa de comunicações externa. Num projecto de business intelligence e usando tecnologias Microsoft SQL Server, o sistema lê e pré-processa ficheiros CSV de grande dimensão, recebidas da empresa de comunicações, combina esses dados com bases de dados existentes e apresenta os resultados sobre a forma de cubos multidimensionais. Posteriormente, este trabalho foi integrado num projecto de data minig, usando a metodologia CRISP-DM, tendo sido possível além de apoiar a decisão pretendida identificar situações ineficientes e mesmo de utilização fraudulenta de equipamentos de comunicação. Vários modelos foram construídos e disponibilizados a diferentes decisores para apoiar decisões estratégicas e de controlo.
- Labor migration from East to West in the context of European integration and changing sociopolitical bordersPublication . Uzagalieva, Ainura; Choinicki, XavierLabor migration from Eastern Europe and the member countries of Commonwealth of Independent States (CIS) to the Western countries became an important socio-economic issue. Since political systems and the nature of border management in these regions, migrations turned out to be a very complex and unpredictable issue. The purpose of this study is to analyze the region specific factors, practices and policies of migration in the Eastern countries, the possible scenarios and demographic consequences of the future migration flows. In order to address this issue properly, some of the complexities of labor migration phenomenon in the region are uncovered.
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