How Long Is A Piece Of Wire? Equilibrium Determination Of Local Telephone Areas
Abstract
This paper studies the endogenous determination of the nature of telephone calls, namely whether they are local or long distance. Calls between users in the same local calling area are local, and we allow the extension of this area to be treated as a strategic variable. We show that the extension of the calling areas which maximises the carrier's profit is the same that a welfare maximising regulator would choose. Under a price cap regime in which prices are required to meet an average price constraint, the firm is shown to manipulate strategically the extension of the local calling areas. We end the paper by considering the case of a competitive market. In this case, again, the owner of the local loop manipulates the extension of the local calling areas to increase profits.Download Info
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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 00/03.Length:
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Handle: RePEc:yor:yorken:00/03
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
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Web page: http://www.york.ac.uk/economics/
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Related research
Keywords: telecommunications; local calling areas; community of interest; regulation; price cap; access; interconnection.;Find related papers by JEL classification:
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-24 (All new papers)
- NEP-IND-2000-01-24 (Industrial Organization)
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hans Ouwersloot & Piet Rietveld, 1997. "On the Distance Dependence of the Price Elasticity of Telecommunications Demand; Meta-analysis, and Alternative Theoretical Backgrounds," Tinbergen Institute Discussion Papers 97-080/3, Tinbergen Institute.
- Mitchell,Bridger M. & Vogelsang,Ingo, 1992.
"Telecommunications Pricing,"
Cambridge Books,
Cambridge University Press, number 9780521416672.
- Mitchell,Bridger M. & Vogelsang,Ingo, 1992. "Telecommunications Pricing," Cambridge Books, Cambridge University Press, number 9780521426787.
- Carlos Martins-Filho & John W. Mayo, 1993. "Demand and Pricing of Telecommunications Services: Evidence and Welfare Implications," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 439-454, Autumn.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Karen Palmer, 1992. "A Test for Cross Subsidies in Local Telephone Rates: Do Business Customers Subsidize Residential Customers?," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 415-431, Autumn.
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