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Regulatory bias in the price structure of local telephone services

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  • Carlos Perez Montes

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    (Banco de España)

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    Abstract

    This article combines a discrete choice model of demand for residential local telephone access and an optimal price regulation model to estimate the welfare weights that state regulators place on consumers with different incomes and locations. I find no evidence of a bias towards rural consumers on average, but the relative weight on low income consumers in a geographic area can vary as a function of the proportions of rural and poor population and the political characteristics of the regulator. I also measure the welfare consequences of deviating from total consumer surplus maximization and disconnecting prices from costs

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1201e.pdf
    File Function: First version, January 2012
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    Bibliographic Info

    Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1201.

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    Length: 76 pages
    Date of creation: Jan 2012
    Date of revision:
    Handle: RePEc:bde:wpaper:1201

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    Keywords: Ramsey prices; regulatory bias; welfare analysis; telecommunications; GMM;

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    3. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2009. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 08-047, Stanford Institute for Economic Policy Research, revised Aug 2009.
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    15. Greenstein, Shane & McMaster, Susan & Spiller, Pablo T, 1995. "The Effect of Incentive Regulation on Infrastructure Modernization: Local Exchange Companies' Deployment of Digital Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 187-236, Summer.
    16. Richard T. Shin & John S. Ying, 1992. "Unnatural Monopolies in Local Telephone," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 171-183, Summer.
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    18. Gifford Raymond L., 2003. "Regulatory Impressionism: What Regulators Can and Cannot Do," Review of Network Economics, De Gruyter, vol. 2(4), pages 1-14, December.
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    21. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
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