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The Effect of Private Interests on Regulated Retail and Wholesale Prices

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  • Gregory L. Rosston
  • Scott J. Savage
  • Bradley S. Wimmer

Abstract

This paper examines how regulators behave in markets when there is a tension between retail competition and cross subsidy. Using retail and wholesale prices from regional Bell operating company territories and price-cost margins as a proxy for political influence, we find that private interests influence the structure of retail prices, especially favoring rural residential customers. Political influence also extends to wholesale access prices, although the magnitude of its effect is small. Federal high-cost universal service payments to a state do not reduce prices in that state's rural areas but instead lower urban business prices. (c) 2008 by The University of Chicago. All rights reserved.

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  • Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2008. "The Effect of Private Interests on Regulated Retail and Wholesale Prices," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 479-501, August.
    • Handle: RePEc:ucp:jlawec:v:51:y:2008:i:3:p:479-501
    DOI: 10.1086/589671
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    References listed on IDEAS

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    1. Ackerberg, Daniel A. & DeRemer, David R. & Riordan, Michael H. & Rosston, Gregory L. & Wimmer, Bradley S., 2014. "Estimating the impact of low-income universal service programs," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 84-98.
    2. Jeffrey T. Macher & John W. Mayo & Olga Ukhaneva & Glenn A. Woroch, 2017. "From universal service to universal connectivity," Journal of Regulatory Economics, Springer, vol. 52(1), pages 77-104, August.
    3. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2018. "Price competition in the market for business telecommunications services," Journal of Regulatory Economics, Springer, vol. 54(1), pages 81-104, August.
    4. Nicholas Bloom & Renata Lemos & Raffaella Sadun & John Van Reenen, 2015. "Does Management Matter in schools?," Economic Journal, Royal Economic Society, vol. 0(584), pages 647-674, May.
    5. Berg, Sanford V. & Jiang, Liangliang & Lin, Chen, 2011. "Incentives for cost shifting and misreporting: US rural universal service subsidies, 1991–2002," Information Economics and Policy, Elsevier, vol. 23(3), pages 287-295.
    6. James G. Mulligan & Daniel J. Wedzielewski, 2012. "Government Intervention to Prevent Bankruptcy: the Effect of Blind-Bidding Laws on Movie Theaters," Working Papers 12-03, University of Delaware, Department of Economics.
    7. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2008. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 07-032, Stanford Institute for Economic Policy Research.
    8. Jeffrey Macher & John Mayo, 2012. "The World of Regulatory Influence," Journal of Regulatory Economics, Springer, vol. 41(1), pages 59-79, February.
    9. Pérez Montes, Carlos, 2013. "Regulatory bias in the price structure of local telephone service," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 462-476.
    10. Holt, Lynne & Galligan, Mary, 2013. "Mapping the field: Retrospective of the federal universal service programs," Telecommunications Policy, Elsevier, vol. 37(9), pages 773-793.

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