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Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912

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  • Weiman, David F
  • Levin, Richard C

Abstract

Focusing on the Southern Bell Telephone Company, the authors propose a modified version of the predation hypothesis to explain Bell's 'natural' monopoly over local telephone service. Southern Bell effectively eliminated competition through a strategy of pricing below cost in response to entry, which deprived competitors of the cash flow required for expansion even if it failed to induce exit; investing in toll lines ahead of demand, isolating independent companies in smaller towns and rural areas, and forcing them to consolidate on favorable terms; and influencing local regulatory policy in larger cities to weaken rivals and ultimately to institutionalize the Bell monopoly. Copyright 1994 by University of Chicago Press.

Suggested Citation

  • Weiman, David F & Levin, Richard C, 1994. "Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 103-126, February.
  • Handle: RePEc:ucp:jpolec:v:102:y:1994:i:1:p:103-26
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    References listed on IDEAS

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    1. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
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    Cited by:

    1. Kaserman, David L. & Mayo, John W., 1999. "Regulatory policies toward local exchange companies under emerging competition: guardrails or speed bumps on the information highway?," Information Economics and Policy, Elsevier, vol. 11(4), pages 367-388, December.
    2. Bernard, Darren, 2016. "Is the risk of product market predation a cost of disclosure?," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 305-325.

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