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Competition in the Interexchange Telecommunication Market

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  • Krouse, Clement G
  • Park, Jongsur

Abstract

Using an econometric model that allows the nature of the oligopoly interaction to be determined by the data, we estimate residual demand elasticities for the switched inter-LATA (local access and transport area) services of AT&T, MCI, and Sprint. For the 9-year period from the third quarter of 1989 to the first quarter of 1998, these estimates fall in the relatively inelastic -1.5 to -1.9 range. Statistical tests of the several elasticity relationships decisively reject hypotheses of perfect competition and a Cournot interaction but do not reject the hypothesis that the market functioned as a coordinated oligopoly.

Suggested Citation

  • Krouse, Clement G & Park, Jongsur, 2003. "Competition in the Interexchange Telecommunication Market," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 85-101, April.
    • Handle: RePEc:ucp:jlawec:y:2003:v:46:i:1:p:85-101
    DOI: 10.1086/345585
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    References listed on IDEAS

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    Cited by:

    1. Brendstrup, Bjarne & Paarsch, Harry J. & Solow, John L., 2006. "Estimating market power in the presence of capacity constraints: An application to high-fructose corn sweetener," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 251-267, March.
    2. Appelbaum, Elie & Berechman, Joseph, 1991. "Demand conditions, regulation, and the measurement of productivity," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 379-400, February.

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