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Market Structure and Welfare in the Finnish Market for Long-Distance Telecommunications

  • Tom Björkroth

    ()

    (Finnish Postgraduate Programme in Economics and Åbo Akademi University, Department of Economics and Statistic, Finland)

This paper attempts to measure the welfare effects associated with the opening of the Finnish market for long-distance voice telephony in 1993. It also focuses on the remaining potential welfare losses associated with imperfect competition in this market. The results suggest that entry benefited consumers substantially in terms of consumer surplus, while the change in operators’ net profits was negative. From 1993 onwards the potential relative welfare loss substantially decreased from about 40 per cent of sales revenues to about 11 per cent. However, the figures for the late 1990s strongly depend upon assumptions regarding market structure and price elasticity. Nevertheless, the results suggest that the potential relative welfare losses are not negligible.

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Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 15 (2002)
Issue (Month): 2 (Autumn)
Pages: 87-101

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Handle: RePEc:fep:journl:v:15:y:2002:i:2:p:87-101
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  1. Willner, Johan & Stahl, Leila, 1992. "Where are the welfare losses of imperfect competition large?," European Journal of Political Economy, Elsevier, vol. 8(3), pages 477-490, October.
  2. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  3. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  4. Barros, Pedro Luis Pita & Cadima, Nuno, 2000. "The Impact of Mobile Phone Diffusion on the Fixed-Link Network," CEPR Discussion Papers 2598, C.E.P.R. Discussion Papers.
  5. Cowling, Keith & Mueller, Dennis C, 1978. "The Social Costs of Monopoly Power," Economic Journal, Royal Economic Society, vol. 88(352), pages 727-48, December.
  6. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
  7. Wahlroos, Bjorn, 1982. " The Welfare Cost of Imperfect Industrial Competition in an Open Economy with an Application to Finland," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(3), pages 457-70.
  8. Paul MacAVOY, 1998. "Testing for Competitiveness of Markets for Long Distance Telephone Services: Competition Finally?," Review of Industrial Organization, Springer, vol. 13(3), pages 295-319, June.
  9. Hausman, Jerry & Tardiff, Timothy & Belinfante, Alexander, 1993. "The Effects of the Breakup of AT&T on Telephone Penetration in the United States," American Economic Review, American Economic Association, vol. 83(2), pages 178-84, May.
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