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Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?

Listed author(s):
  • Nicholas Economides
  • Lawrence J. White

This paper critiques some of the properties of the so-called "efficient component pricing rule" (ECPR) for access to a bottleneck (monopoly) facility. When an entrant/rival and the bottleneck monopolist both produce a complementary component to the bottleneck service, the ECPR specifies that the access fee paid by the rival to the monopolist should be equal to the monopolist's opportunity costs of providing access, including any forgone revenues from a concomitant reduction in the monopolist's sales of the complementary component. We focus especially on the case in which the monopolist's price for the complementary component is above all relevant marginal costs. In this case the ECPR's exclusion of rivals may be socially harmful, since it may be preventing a substantial decrease in the price of the complementary component.

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Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 95-04.

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Date of creation: Oct 1995
Handle: RePEc:ste:nystbu:95-04
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New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126

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