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Tacit Collusion Under regulation in the Pricing of Interstate Long‐Distance Telephone Services

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  • Paul W. MacAvoy

Abstract

Analysis of seven wholesale and retail markets for long‐distance telephone services since the AT & T divestiture indicates that service provider concentration declined in the later 1980s and then stabilized in the 2990–1993 period. In addition to this stability in market shares, a number of other conditions established since 1990 have been conducive to the development of market sharing rather than significant price competition. The most important of these conditions has been the tarifing process of the Federal Communications Commission by which MCI and Sprint replicate ATGT's price announcements. As market shares stabilized and became more equal, and as regulation formalized the price‐setting process, the price‐cost margins of the three large carriers increased and became more nearly identical. These results are consistent not with price competition but rather with emerging tacit collusion among AT&T, MCI, and Sprint.

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  • Paul W. MacAvoy, 1995. "Tacit Collusion Under regulation in the Pricing of Interstate Long‐Distance Telephone Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 147-185, June.
    • Handle: RePEc:bla:jemstr:v:4:y:1995:i:2:p:147-185
    DOI: 10.1111/j.1430-9134.1995.00147.x
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    Cited by:

    1. Michelle Sovinsky, 2022. "Do Research Joint Ventures Serve a Collusive Function?," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 430-475.
    2. Ashish Nayyar, 2004. "Entry in a Dynamic Model with Equilibrium Price Dispersion with an Application to the Market for Long‐Distance Telephone Services," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 577-592, October.

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