Competition, innovation and performance: the portuguese mobile market

Abstract

The main goal of this paper is to prove that present incentives to innovation are strongly influenced by concentration and by market power, but actual competition has had a small impact on productivity and a strong effect on prices of mobile phone. We propose a model adapted from that developed by Banker, Chang and Majumdar (1993) to prove our assumptions. Rentability is disaggregated into four items: productivity, price recovery, product mix and capacity utilisation. We prove that the increase in competition among firms introduced a bias in the operators¡¯ strategies: from differentiation to a cost strategy.