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Who Decides to Regulate? Lobbying Activity in the U.S. Cellular Industry

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  • Tomaso Duso

Abstract

How does the choice to regulate a market take place? And how does regulation influence market outcome? We argue that to explicitly model the simultaneity between these two issues makes a qualitative difference in the analysis of the role of regulation, and empirically test our model in the U.S. mobile telecommunications industry. We find support for our approach: Regulatory choice should be considered endogenous. We show that, correcting for the simultaneity, regulation's overall effect should have been a reduction of cellular tariffs. However, this result is not highly significant. Our explanation for this finding is that firms' lobbying activity on regulatory choice has been successful: some firms were able to avoid regulation in those market where it would have significantly reduced prices. We argue that this is the real source of the found simultaneity. Moreover, we provide evidence that the probability of regulation was higher, other things equal, when the regulator was appointed by politicians, when the State's Governor came from the democratic party, and when the government was politically stable. ZUSAMMENFASSUNG - (Wer entscheidet zu regulieren? Lobbying-Aktivität in der U.S.-amerikanischen Mobilfunk-Industrie) In diesem Beitrag wird explizit berücksichtigt und modelliert, daß die Unternehmen durch ihr Marktverhalten die Regulierungsentscheidung der Aufsichtsbehörde beeinflussen können. Anhand von U.S.-amerikanischen Daten für die Mobilfunk-Industrie (1984-1988) kann die Hypothese, daß die Regulierungsentscheidung endogen durch das Verhalten der Unternehmen am Markt mitbestimmt wird, nicht verworfen werden. Bei Berücksichtigung dieser Simultaneität können wir im Gegensatz zur vorherigen Analysen zeigen, daß die Regulierung die Mobilfunktarife durchschnittlich gesenkt hat. Jedoch ist dieses Ergebnis nur von geringer statistischer Signifikanz. Dieses Phänomen läßt sich durch die Theorie des Lobbying erklären. Bewirkt Regulierung große Preissenkungen, so haben die Unternehmen einen großen Anreiz durch Lobbying eine Regulierung der Mobilfunktarife abzuwehren; mit der Wirkung, daß seltener reguliert wird. Sind die Wirkungen der Regulierung hingegen gering, so sind auch die Lobbying-Anreize klein, und Regulierung wird häufiger beobachtet. Die empirische Analyse zeigt, daß das Lobbying mancher Unternehmen erfolgreich war so, daß gerade solche Märkte nicht reguliert wurden, in den die Regulierung am effektivsten gewesen wäre. Außerdem zeigt sich, daß die Regulierungswahrscheinlichkeit eines Marktes - ceteris paribus - steigt, wenn die Regulierungsbehörde von Politikern einberufen wird, wenn der Gouverneur des Bundestaats der demokratischen Partei angehört und wenn die Regierung politisch stabil ist.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 00-05.

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Length: 50 pages
Date of creation: Apr 2000
Date of revision:
Handle: RePEc:wzb:wzebiv:fsiv00-05

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Related research

Keywords: Price Regulation; Lobbying Activity; Mobile Telecommunications; Simultaneity Bias; Endogenous Switching Regression; U.S.;

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