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Telephone Pricing Structures: The Effects on Universal Service


  • Cain, Paul
  • Macdonald, James M


The authors use 1987 data to study the household demand for access to the telephone system. Previous analyses find demand to be highly inelastic and, therefore, predict that local rate increases will have little impact on the goal of providing universal telephone service. They estimate that price has a considerably stronger effect on access demand, especially at low incomes, and argue that elasticities increased in the 1980s. But their evidence also suggests that the structure of telephone rates matter: where local measured service is available, changes in flat rate prices have no effect on access demand. Copyright 1991 by Kluwer Academic Publishers

Suggested Citation

  • Cain, Paul & Macdonald, James M, 1991. "Telephone Pricing Structures: The Effects on Universal Service," Journal of Regulatory Economics, Springer, vol. 3(4), pages 293-308, December.
  • Handle: RePEc:kap:regeco:v:3:y:1991:i:4:p:293-308

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    References listed on IDEAS

    1. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-359, December.
    2. Bagwell, Kyle & Wolinsky, Asher, 2002. "Game theory and industrial organization," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 49, pages 1851-1895 Elsevier.
    3. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
    4. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    5. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-245, November.
    6. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    7. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    8. Rosston, Gregory L. & Wimmer, Bradley S., 2000. "The 'state' of universal service," Information Economics and Policy, Elsevier, vol. 12(3), pages 261-283, September.
    9. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    10. Milton L. Mueller, 1997. "Universal Service," Books, American Enterprise Institute, number 53006, September.
    11. Rosston, G.R. & Wimmer, B.S., 2000. "The "State" of Universal Service," Papers 99-018, United Nations World Employment Programme-.
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    Cited by:

    1. Gassner, Katharina, 1998. "An estimation of UK telephone access demand using Pseudo-Panel data," Utilities Policy, Elsevier, vol. 7(3), pages 143-154, November.
    2. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2008. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 07-032, Stanford Institute for Economic Policy Research.
    3. Sergio Da Silva & Gustavo Manfrim, 2007. "Estimating demand elasticities of fixed telephony in Brazil," Economics Bulletin, AccessEcon, vol. 12(5), pages 1-9.
    4. Ackerberg, Daniel A. & DeRemer, David R. & Riordan, Michael H. & Rosston, Gregory L. & Wimmer, Bradley S., 2014. "Estimating the impact of low-income universal service programs," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 84-98.
    5. Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 477-502, October.
    6. Mongkolporn, Veerasak & Yin, Xiangkang, 2005. "How does the entry of new firms change demand? An empirical estimation for a Thai telecommunications company," Journal of Asian Economics, Elsevier, vol. 16(4), pages 688-703, August.
    7. Ramos, Boris & Saeed, Khalid & Pavlov, Oleg, 2010. "The impact of Universal Service Obligations and International Cross-subsidies on the dispersion of telephone services in developing countries," Socio-Economic Planning Sciences, Elsevier, vol. 44(2), pages 57-72, June.
    8. Katharina GASSNER, 1998. "An Estimation of UK Telephone Access Demand Using Pseudo-Panel Data," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9817, Université de Lausanne, Faculté des HEC, DEEP.
    9. repec:ebl:ecbull:v:12:y:2007:i:5:p:1-9 is not listed on IDEAS

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