nep-com New Economics Papers
on Industrial Competition
Issue of 2007‒04‒09
27 papers chosen by
Russell Pittman
US Department of Justice

  1. Two Tales on Resale By Felix Höffler; Klaus M. Schmidt
  2. Entry and Market Selection of Firms: A Laboratory Study By Jordi Brandts; Ayça Ebru Giritligil
  3. Price Competition and Product Differentiation when Goods have Network Effects By Klaus Conrad
  4. A Simple Business-Cycle Model with Schumpeterian Features By Luis F. Costa; Huw D. Dixon
  5. Merger Remedies at the European Commission: A Multinomial Logit Analysis By Bougette, Patrice; Turolla, Stéphane
  6. Generic entry into a regulated pharmaceutical market By Iván Moreno Torres; Jaume Puig; Joan-Ramon Borrell-Arqué
  7. Pricing behaviour under competition in the UK electricity supply industry By Giulietti, Monica; Otero, Jesus; Waterson, Michael
  8. A Regulatory Framework for New and Emerging Markets By Baake, Pio; Kamecke, Ulrich; Wey, Christian
  9. Tomb price discrimination in cemeteries: competition in the market for corpses? By FRANCISCO MARCOS; JUAN SANTALO
  10. Oligopoly Model of a Debit Card Network By Manchev, Peter
  11. Access Pricing and Entry in the Postal Sector By Francis Bloch; Axel Gautier
  12. Price Competition and Product an environmental friendly substitute is available. By Klaus Conrad
  13. The Effects of the Asymmetry of Information Intrafirms on Oligopolistic Market Outcomes By Testuya Shinkai; Makoto Okamura
  14. Perfect Competition By M. Ali Khan
  15. Fat Products By Alexei Alexandrov
  16. The Demand for Tailored Goods and the Theory of the Firm By Thiele, Veikko
  17. Corporate Governance and Acquisitions: Acquirer Wealth Effects in the Netherlands By Jong, A. de; Poel, M. van der; Wolfswinkel, M.
  18. Exclusive contracts and demand foreclosure By David Spector
  19. The Role of Technology in M&As: A Firm Level Comparison of Cross-Border and Domestic Deals By Frey, Rainer; Hussinger, Katrin
  20. Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition By Mark Satterthwaite; Artyom Shneyerov
  21. R&D Competition with Radical and Incremental Innovation. By Maria Rosa Battaggion; Daniela Grieco
  22. Mergers and Acquisitions, Employment, Wages and Plant Closures in the U.S. Meat Product Industries: Evidence from Micro Data By Michael Ollinger; Sang Nguyen
  23. The Pricing of Academic Journals: A Two-Sided Market Perspective By Doh-Shin Jeon; Jean-Charles Rochet
  24. Rationing-Based Price Discrimination By Ruhai Wu; Xianjun Geng; Andrew B. Whinston
  25. Monopoly with Resale By Giacomo Calzolari; Alessandro Pavan
  26. A New View of Scale and Scope in the Telecommunications Industry: Implications for Competition and Innovation By Bourdeau de Fontenay, Alain; Liebenau, Jonathan; Savin, Brian
  27. "Net Neutrality," Non-Discrimination and Digital Distribution of Content Through the Internet By Nicholas Economides

  1. By: Felix Höffler (Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany.; Klaus M. Schmidt (Department of Economics, University of Munich, Ludwigstrasse 28, 80539 Muenchen, Germany.
    Abstract: In some markets vertically integrated firms sell directly to final customers hut also to independent downstream firms with whom they then compete on the downstream market. It is often argued that resellers intensify competition and benefit consumers, in particular when wholesale prices are regulated. However, we show that (i) resale may increase prices and make consumers worse off and that (ii) standard "retail minus X regulation" may increase prices and harm consumers. Our analysis suggests that this is more likely if the number of integrated firms is small, the degree of product differentiation is low, and/or if competition is spatial.
    Keywords: Resale regulation, wholesale, spatial product differentiation, non-spatial product differentiation, vertical restraints
    JEL: D43 L11 L42 L51
    Date: 2007–03
  2. By: Jordi Brandts; Ayça Ebru Giritligil
    Abstract: We study competition in experimental markets in which two incumbents face entry by three other firms. Our treatments vary with respect to three factors: sequential vs. block or simultaneous entry, the cost functions of entrants and the amount of time during which incumbents are protected from entry. Before entry incumbents are able to collude in all cases. When all firms' costs are the same entry always leads consumer surplus and profits to their equilibrium levels. When entrants are more efficient than incumbents, entry leads consumer surplus to equilibrium. However, total profits remain below equilibrium, due to the fact that the inefficient incumbents produce too much and efficient entrants produce too little. Market behavior is satisfactory from the consumers' standpoint, but does not yield adequate signals to other potential entrants. These results are not affected by whether entry is simultaneous or sequential. The length of the incumbency phase does have some subtle effects.
    Keywords: Market selection, Imperfect competititon, Entry, Experiments
    JEL: C72 D43 D83 L13
    Date: 2006–09–01
  3. By: Klaus Conrad (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: The objective of our approach is to develop a model which captures horizontal product differentiation under environmental awareness, product innovation under network effects, and price competition whereby environmentally friendly products are costlier to produce. As an example, we refer to automobile producers, offering cars with a gasoline powered engine and one with a natural gas powered engine. The network of petrol stations provide the complementary good. The fulfilled expectation equilibrium could be one with either the firm offering the conventional engine as the only producer, or one with the firm offering the new technology as the only producer, or one where both firms share the market. Which equilibrium will emerge depends on the cost of producing energy efficient engines and on environmental awareness of the consumers. Due to the latter aspect the innovative firm has a chance to enter the market. We use a two stage game in prices and characteristics to analyse the respective market structure. We show that if environmental awareness is strong, the firm with the conventional technology will improve energy efficiency of its product. If the network effect is weak, both firms will be in the market. Prices and profits will decline if the role of the network effect becomes important.
    JEL: L11 Q38 H23 L62
  4. By: Luis F. Costa (ISEG/Technical University of Lisbon and UECE); Huw D. Dixon (University of York)
    Abstract: We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible, introduces hysteresis in the business cycle. Expansionary shocks may lead the economy to a new ‘prosperity plateau,’ but contractionary shocks only affect the market power of mature industries
    Keywords: Entry, Hysteresis, Mark-up
    JEL: E62 L13 L16
    Date: 2007–02–02
  5. By: Bougette, Patrice; Turolla, Stéphane
    Abstract: This paper aims to build and empirically evaluate a discrete choice model of merger remedies as a basis for policy analysis. The database consists of 229 merger cases accepted in Phase I or Phase II of the European merger process between 1990 and 2005. We focus on the following question: Which merging firms' characteristics lead the European Commission to decide whether to require conditional acceptance? Although a lot of empirical studies have been carried out these last years, ours is distinguished by at least two original features. First, we explore determinant factors of the Commission's decisions with a neural network model differentiating cases accepted with or without remedies (either structural or behavioral). Secondly, we implement three multinomial logit models. We find that variables related to high market power lead more frequently to a remedy outcome, whatever the phase. Innovative industries such as energy, transportation and communications positively affect the probability of a behavioral remedy. Lastly, former Competition Commissioner Mario Monti's policy appears to be pro-remedy, i.e. seeking concessions from merging parties.
    Keywords: Merger Remedies ; Antitrust ; European Commission ; Discrete Choice Models ; Self-Organizing Maps
    JEL: L40 K21 D78
    Date: 2006–09
  6. By: Iván Moreno Torres; Jaume Puig; Joan-Ramon Borrell-Arqué
    Abstract: The aim of this paper is to analyse empirically entry decisions by generic firms into markets with tough regulation. Generic drugs might be a key driver of competition and cost containment in pharmaceutical markets. The dynamics of reforms of patents and pricing across drug markets in Spain are useful to identify the impact of regulations on generic entry. Estimates from a count data model using a panel of 86 active ingredients during the 1999–2005 period show that the drivers of generic entry in markets with price regulations are similar to less regulated markets: generic firms entries are positively affected by the market size and time trend, and negatively affected by the number of incumbent laboratories and the number of substitutes active ingredients. We also find that contrary to what policy makers expected, the system of reference pricing restrains considerably the generic entry. Short run brand name drug price reductions are obtained by governments at the cost of long run benefits from fostering generic entry and post-patent competition into the markets.
    Keywords: Entry; Generic Drugs; Pharmaceutical industry; Reference pricing
    JEL: I11 L11 L65
    Date: 2007–02
  7. By: Giulietti, Monica (Aston Business School); Otero, Jesus (Universidad del Rosario, Colombia); Waterson, Michael (University of Warwick)
    Abstract: This paper investigates the evolution of electricity prices for domestic customers in the UK following the introduction of competition. The empirical analysis is based on a panel data set containing detailed information about electricity supply prices over the period 1999 to 2006. The analysis aims to test theoretical hypotheses about the nature of consumers’ switching and search costs. The econometric analysis of persistence and price dispersion provides only limited support for the view that the market is becoming more competitive and also indicates that there remain significant potential benefits to consumers from searching alternative suppliers.
    Keywords: electricity supply ; price competition ; convergence ; dynamic panels ; crosssectional dependency
    JEL: L43 L13 L94 C22 C23
    Date: 2007
  8. By: Baake, Pio; Kamecke, Ulrich; Wey, Christian
    Abstract: The future of the information society crucially depends on investments in upgrading existing infrastructures and building new networks. Traditional cost-based regulation, which focuses on issues of static efficiency and service-based competition necessarily has negative effects on innovation incentives and the emergence of infrastructure-based competition in the highly dynamic telecommunications industry. This paper presents a regulatory framework for new infrastructures, which makes ex ante regulation contingent to the tendency towards effective competitive structures. Unlike the standard Significant Market Power-test (SMP), this approach takes a longer term perspective and therefore secures operators' investment incentives. The proposal has several desirable incentive effects. Firstly, it counters incentives to free-ride on investments by potential competitors, and secondly, it makes preemptive and other predatory practices by the investing firm less attractive. As a result, our proposal of contingent regulation in emerging markets promotes infrastructure-based competition in telecommunications.
    Keywords: new markets; infrastructure investments; regulation
    JEL: L90 L43 K23 L96
    Date: 2005–12
  9. By: FRANCISCO MARCOS (Instituto de Empresa); JUAN SANTALO (Instituto de Empresa)
    Abstract: We study empirically the determinants of public tomb prices in a sample of Spanish towns. We document strong evidence in favor that cemeteries act as local monopolies that use second degree price discrimination to maximize profits. Additionally we report that local cemetery prices react to competition from private cremation companies. This competition is associated with lower price dispersion caused by an increase in the minimum niche prices with no effect on other higher niche prices. We conclude that cemeteries have accommodated and facilitated entry of private cremation companies through an increase in those niche prices more likely to affect cremation demand.
    Keywords: Administrative law, Non-market regulation, Public prices
    Date: 2007–01
  10. By: Manchev, Peter
    Abstract: The paper builds an oligopoly model of a debit card network. It examines the competition between debit card issuers. We show that there is an optimal pricing for the debit card network, which maximizes all issuer's revenues. The paper also shows that establishing a link between debit card networks averages the costs provided that there is no growth in the customer's usage of the networks, resulting from the link.
    Keywords: debit card; payment networks; switch fees; access pricing
    JEL: G21 L13
    Date: 2006–07–28
  11. By: Francis Bloch; Axel Gautier
    Abstract: Postal markets have been open to competition for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are active on the upstream segments of the market -preparation, collection, outward sorting and transport of mail products. With the further steps planned in the liberalization process, there are new opportunities to extend competition to the downstream segments of the market -the delivery of mails. In the future, two business models will be possible for the new postal operators: (1) access: where the firm performs the upstream operations and uses the incumbent’s delivery network and (2) bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have different impacts on welfare and the profit of the incumbent operator. The choice between access and bypass depends on the entrant's delivery cost relative to the cost of buying access to the incumbent operator (the access price). In this paper, we derive optimal -welfare maximizing- stamp and access prices for the incumbent operator when these prices have an impact on the delivery method chosen by the entrant. We show how prices should be re-balanced when the entry method is considered as endogenous i.e. affected by the incumbent's prices.
    Date: 2006
  12. By: Klaus Conrad (Institut für Volkswirtschaft und Statistik (IVS))
    Abstract: When deciding to buy differentiated products, a compromise is sometimes made between preferred characteristics of the good and its environmental properties. In this paper we investigate the market implication of product differentiation when customers are concerned about environmental aspects of the good. We use the spacial duopoly model to determine how environmental concern affects prices, product characteristics and market shares of the competing firms. Our analysis is based on a two-stage game where at the first stage each firm chooses the characteristic of its product. At the second stage each firm chooses its price. The unique equilibrium prices and market shares are affected by consumer awareness of the environment and by the higher costs for producing those goods. As for the Nash equilibria in the characteristics we find three equilibria depending on the parameter constellation. In order to find out whether the market functions in an optimal way we determined the choice of environmental characteristics by a welfare maximizing authority. The result of this analysis is that characteristics differ under private decision making and social one. It can be shown, however, that it is possible to choose environmental policy instruments in order to stimulate private firms to produce the social optimal qualities.
    JEL: L11 Q38 H23
  13. By: Testuya Shinkai (Kwansei Gakuin University); Makoto Okamura (Hiroshima University)
    Abstract: We consider an oligopoly with a principal-agent relationship, in which a firm's marginal cost is decreasing in a manager's managerial effort and is subject to an additive uncertainty. Two types of firms operate: one displays symmetric information between the owner and the manager, another presents asymmetric information. We show that if the marginal cost's derivative of the manager is sufficiently small, then the expected effort level in an asymmetric information firm exceeds that in a symmetric one. We also show that the expected total output and consumer surplus may reduce at equilibrium, as the number of symmetric information firms increases.
    Keywords: asymmetric information, incentive scheme, competition effort, oligopoly
    JEL: D82 L13
    Date: 2006–04
  14. By: M. Ali Khan (The Johns Hopkins University, Baltimore, USA)
    Abstract: In his 1987 entry on ‘Perfect Competition’ in The New Palgrave, the author reviewed the question of the perfectness of perfect competition, and gave four alternative formalisations rooted in the so-called Arrow-Debreu-Mckenzie model. That entry is now updated for the second edition to include work done on the subject during the last twenty years. A fresh assessment of this literature is offered, one that emphasises the independence assumption whereby individual agents are not related except through the price system. And it highlights a ‘linguistic turn’ whereby Hayek’s two fundamental papers on ‘division of knowledge’ are seen to have devastating consequences for this research programme
    Keywords: Allocation of Resources, Perfect Competition, Exchange Economy
    JEL: D00
    Date: 2007
  15. By: Alexei Alexandrov
    Abstract: The economics literature generally considers products as points in some characteristics space. Starting with Hotelling, this served as a convenient assumption, yet with more products being flexible or self-customizable to some degree it makes sense to think that products have positive measure. I develop a model where ?rms can o¤er interval long 'fat' products in the spatial model of differentiation. Contrary to the standard results pro?ts of the firms can decrease with increased differentiation - there is a standard effect of lowering the incentive to cut prices, but there is also an incentive to provide more content sometimes resulting in lower profits. Consumer welfare increases unambiguously with respect to the standard model of Salop. I also find that it is profitable for firms to commit as an industry not to make fat products. If one firm is a leader and another is a follower, the leader accommodates the follower by settling for less pro?ts if differentiation is small.
    Keywords: self-customizable products, flexible products, product differentiation
    JEL: D4 L11 L13
  16. By: Thiele, Veikko
    Abstract: The transaction cost theory predicts that firms are inclined to vertically integrate transactions in response to the specificity of their required inputs. Yet, reality proves that some firms engage in repeated transactions with external suppliers aimed at procuring highly specific inputs. To explain this phenomenon, this paper elaborates on a firm's make-or-buy decision in a context with relational contracts in order to investigate how this decision is affected by the required input specificity. This paper demonstrates that a high degree of input specificity can lead to repeated market transactions being favored over vertical integration because demanding more specific inputs (i) impose lower costs to maintain repeated market transactions founded on relational contracts; and (ii), facilitate the self-enforcement of these relational contracts.
    Keywords: Input specificity; vertical integration; market transactions; relational contracts; transaction cost theory
    JEL: D23 L23 L22
    Date: 2007–03–12
  17. By: Jong, A. de; Poel, M. van der; Wolfswinkel, M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: We examine 865 acquisitions by Dutch industrial firms over the period 1993?2004. Theoretical work based on principal?agent problems predicts that managers of exchange-listed corporations may pursue acquisitions even when these do not add value for the shareholders. Corporate governance structures serve to constrain managers in their acquisition activity. In this chapter we measure the shareholder wealth effects of acquisitions and the factors that determine these wealth effects, including the governance characteristics of corporations. Firms in the Netherlands are interesting from the perspective of corporate governance, because the managerial board has a relatively strong position vis-?-vis shareholders. Several takeover defenses commonly used in the Netherlands not only limit shareholder influence during takeover battles, but also in absence of such fights. On the other hand, ownership is relatively concentrated, which may provide shareholders with the incentives and power to monitor the management. The average abnormal stock return following acquisition announcements is 1.1%, which is a significant positive effect. There is only a significant negative impact of the so-called structured regime, a situation where several shareholder rights are delegated to the supervisory board. This result suggests that governance improves acquisition decisions.
    Keywords: Mergers & acquisitions;Corporate governance;The Netherlands;Event study;
    Date: 2007–03–28
  18. By: David Spector
    Abstract: A firm may decide to have some of its customers sign exclusive contracts in order to deprive a rival of the minimum viable size, exclude it from the market, and enjoy increased market power. If contracts are required to be simple enough, this strategy may induce inefficient exclusion even if the excluded firm is present at the contracting stage. Exclusive contracts may thus cause inefficient eviction, not only entry-deterrence, even though the former is less likely than the latter. However, complex enough contracts, if feasible, would allow agents to reach a Pareto-optimum, without inefficient exclusion.
    Date: 2007
  19. By: Frey, Rainer; Hussinger, Katrin
    Abstract: Technological change is often hypothesized as one of the main drivers of merger activities. This paper analyzes the role of technology in mergers and acquisitions (M&As) at the firm level. Based on a newly created data set that combines financial information and patent data for public firms in Europe as well as country level variables, we apply a structural model to investigate technology-related motivations behind merger formation. Distinguishing between cross-border and domestic M&As, we find that technological relatedness of the M&A partners reduces uncertainty and the expected risk of failure associated with cross-border acquisitions significantly, whereas there is no evidence for technological complementarities driving domestic M&As. The relevance of technology for cross-border M&As further illustrates the international character of technology markets.
    Keywords: domestic versus cross-border M&As, technological relatedness, market relatedness
    JEL: C25 G34 O32 O34
    Date: 2006
  20. By: Mark Satterthwaite; Artyom Shneyerov
    Abstract: Consider a decentralized, dynamic market with an infinite horizon in which both buyers and sellers have private information concerning their values for the indivisible traded good. Time is discrete, each period has length ?, and each unit of time a large number of new buyers and sellers enter the market to trade. Within a period each buyer is matched with a seller and each seller is matched with zero, one, or more buyers. Every seller runs a first price auction with a reservation price and, if trade occurs, both the seller and winning buyer exit the market with their realized utility. Traders who fail to trade either continue in the market to be rematched or become discouraged with probability ?? (? is the discouragement rate) and exit with zero utility. We characterize the steady-state, perfect Bayesian equilibria as ? becomes small and the market–in effect– becomes large. We show that, as ? converges to zero, equilibrium prices at which trades occur converge to the Walrasian price and the realized allocations converge to the competitive allocation.
  21. By: Maria Rosa Battaggion (Department of Economics, University of Bergamo); Daniela Grieco (Bocconi University)
    Abstract: Recent empirical evidence about innovation shows that established firms rarely invest in radical innovation but incrementally improve the existing technology. Revolutionary breakthroughs are more likely to be introduced by new entrants. These stylized facts motivate a renewed attention of the debate on incentives to innovate. In this stream of the literature our paper emphasizes the importance of distinguishing between degrees of innovativeness when comparing an incumbent’s and an entrant’s incentives to invest in innovation. The model presented captures the peculiarity of a radical innovation with respect of an incremental one along three dimension: risk, impact on the existing market and capability of opening up a new market. The results reflect the empirical evidence and emphasize the role of substitutability between markets in determining the strength of this effect.
    Date: 2007–01
  22. By: Michael Ollinger; Sang Nguyen
    Abstract: The purpose of this paper is to evaluate the impact of mergers and acquisitions (M&As) on wages and employment and plant closures in the meat packing, prepared meat products, and poultry slaughter and processing industries over 1977-87 and 1982-92. The analysis relies on a balanced panel dataset of all plants owned by meat and poultry firms that existed over 1977-87 or 1982-92. We find that (1) M&As are positively associated with wages in the meat packing and prepared meat products industries over 1977-87, but not over 1982-92; (2) changes in employment are positively related to M&As in all three meat and poultry industries over 1977-87, but only in the poultry industry over 1982-92; and (3) M&As are negatively associated with plant closures.
    Keywords: mergers and acquisitions, wages, employment, meat industry, poultry industry
    JEL: J63
    Date: 2007–03
  23. By: Doh-Shin Jeon; Jean-Charles Rochet
    Abstract: More and more academic journals adopt an open-access policy, by which articles are accessible free of charge, while publication costs are recovered through author fees. We study the efficient pricing of an academic journal from a two-sided market perspective and the consequences of the open access policy on the journal’s quality standard. When the journal’s objective is to maximize social welfare, open access is optimal if and only if the positive externalities generated by its diffusion exceed the marginal cost of distribution. This condition is satisfied in particular for an electronic journal for which the marginal cost of distribution is zero. However, we show that if the journal is run by a not-for-profit association that has a different objective (such as maximizing the utility of its readers or the impact of the journal), the move from the traditional reader-pays model to the open-access model may result in a decrease in quality standard below the socially efficient level. In some cases, it may even lead to a reduction in readership size.
    Keywords: Academic Journals, Open-Access, Reader-Pays, Two-Sided Market, Endogenous Quality
    JEL: D42 L44 L82
    Date: 2007–03
  24. By: Ruhai Wu (Department of Economics, College of Business, Florida Atlantic University); Xianjun Geng (Department of Information Systems and Operations Management, University of Washington Business School); Andrew B. Whinston (Department of Information, Risk, and Operations Management, McCombs School of Business, University of Texas, Austin)
    Abstract: This paper provides a theory of rationing where rationing functions as an effective mechanism for second degree price discrimination by a monopoly seller. When a seller charges multiple prices on homogenous products to all consumers, supply at the lowest price is limited and rationed among consumers. The supply shortage differentiates products sold at the lowest price and those sold at a higher price. When high-valuation consumers identify themselves at the higher price, the seller may extract more consumer surplus and increase his profit. In the paper, we address two common rationing-based price discrimination strategies, multiple-price menu and premium advance selling.. We also show that rationing-based price discrimination can be combined with other classical price discrimination strategies to further increase the seller’s profit.
    Keywords: rationing, price discrimination
    JEL: D42 L12
    Date: 2006–12
  25. By: Giacomo Calzolari; Alessandro Pavan
    Abstract: This paper examines the intricacies associated with the design of revenue-maximizing mechanisms for a monopolist who expects her buyers to resell. We consider two cases: resale to a third party who does not participate in the primary market and inter-bidder resale, where the winner resells to the losers. To influence the resale outcome, the monopolist must design an allocation rule and a disclosure policy that optimally fashion the beliefs of the participants in the secondary market. Our results show that the revenue-maximizing mechanism may require a stochastic selling procedure and a disclosure policy richer than the simple announcement of the decision to trade.
    Keywords: information linkage between primary and secondary markets, optimal disclosure policy, stochastic allocations, mechanism design.
    JEL: D44 D82
  26. By: Bourdeau de Fontenay, Alain; Liebenau, Jonathan; Savin, Brian
    Abstract: Telecommunication economic analysis has largely relied upon a conventional economic framework that has its roots in neoclassical analysis that emerged almost a hundred years ago, and has contributed to reshaping the direction of economic policies by attacking the premises of the 1996 Telecommunications Act, and providing far greater leeway to incumbents, as well as challenging the economic efficiency of new entrants. Common approaches based upon a large number of simplifying assumptions that include,for instance, the idea that the technology is exogenous. Such hypotheses make little sense at a conceptual level. In addition, this idea is largely contradicted by the short period during which the sector achieved some level of competition around the 1900's and 2000. Not only have economists not thought about any number of such hypotheses, but they have also failed to consider how they might have an impact on their analysis. Evaluating a number of such issues in this paper, we are able to show how conventional economic analysis, uncritically applied to the sector, contributed to the undoing of the 1996 Telecommunications Act and of much of the competition it helped facilitate.
    Keywords: scale and scope; competition; telecommunications industry structure.
    JEL: L90 L43 K23 L96
    Date: 2005–12
  27. By: Nicholas Economides
    Date: 2007

This nep-com issue is ©2007 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.