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Regulatory bias in the price structure of local telephone service


  • Pérez Montes, Carlos


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 implicitly 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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:462-476 DOI: 10.1016/j.ijindorg.2013.08.002

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    References listed on IDEAS

    1. Nicholas Economides & Katja Seim & V. Brian Viard, 2008. "Quantifying the benefits of entry into local phone service," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 699-730.
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    Full references (including those not matched with items on IDEAS)

    More about this item


    Ramsey prices; Regulatory bias; Welfare analysis; Telecommunications; GMM;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis


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