Product Substitutability and Competition in Long-Distance Telecommunications
AbstractI estimate the degree of substitutability between U.S. long-distance telecommunications carriers. AT&T's Marshallian demand elasticity for basic long-distance service is estimated to be about -10. With various assumptions regarding producer behavior, a range of residual demand elasticities, price-cost margins, and the dead-weight losses are calculated. I argue that producer behavior is such that the dead-weight loss to supracompetitive pricing is likely to be about 1.5% of industry revenues. The results bear on whether AT&T's deregulation was merited and whether to allow the Bell Operating Companies to enter the long-distance market. Copyright 1999 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 37 (1999)
Issue (Month): 4 (October)
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- Kondaurova, Irina & Weisman, Dennis L., 2003. "Incentives for non-price discrimination," Information Economics and Policy, Elsevier, vol. 15(2), pages 147-171, June.
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- Simran Kahai & David Kaserman, 2007. "Effective regulation versus tacit collusion in the long-distance market: an empirical analysis," Journal of Regulatory Economics, Springer, vol. 32(3), pages 247-257, December.
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