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

  • Nicholas Economides

    (Stern School of Business, New York University)

  • Lawrence J. White

    (Stern School of Business, New York University)

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 EconWPA in its series Industrial Organization with number 9701003.

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Length: 23 pages
Date of creation: 27 Jan 1997
Date of revision:
Handle: RePEc:wpa:wuwpio:9701003
Note: Type of Document - PDF/PostScript; prepared on IBM PC; to print on HP; pages: 23; figures: included. published in The Antitrust Bulletin, vol. XL, no. 3, pp. 557-579.
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