IDEAS home Printed from https://ideas.repec.org/a/bla/kyklos/v58y2005i3p331-351.html
   My bibliography  Save this article

Splitting the Baby: An Empirical Test of Rules of Thumb in Regulatory Price Setting

Author

Listed:
  • T. Randolph Beard
  • George S. Ford

Abstract

This article provides an empirical evaluation of a recent and important exercise in regulatory price setting in the United States. The 1996 Telecommunications Act required incumbent local phone companies to sell components of their network to rival firms at regulated prices, and the prices for these ‘unbundled network elements’ were based primarily on independent estimates of forward‐looking economic costs. Our econometric analysis reveals that, while cost is a primary determinant of element prices, the prices also reflect foregone retail profits for incumbent firms. Statistical tests suggest that ‘splitting the baby’ is an accurate positivist description of public agency behavior.

Suggested Citation

  • T. Randolph Beard & George S. Ford, 2005. "Splitting the Baby: An Empirical Test of Rules of Thumb in Regulatory Price Setting," Kyklos, Wiley Blackwell, vol. 58(3), pages 331-351, July.
    • Handle: RePEc:bla:kyklos:v:58:y:2005:i:3:p:331-351
    DOI: 10.1111/j.0023-5962.2005.00291.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0023-5962.2005.00291.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0023-5962.2005.00291.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Oecd, 2003. "Developments in Local Loop Unbundling," OECD Digital Economy Papers 74, OECD Publishing.
    2. Palmer, Karen & Ando, Amy, 1998. "Getting on the Map: The Political Economy of State-Level Electricity Restructuring," RFF Working Paper Series dp-98-19-rev, Resources for the Future.
    3. Brown,Stephen J. & Sibley,David Sumner, 1986. "The Theory of Public Utility Pricing," Cambridge Books, Cambridge University Press, number 9780521314008, October.
    4. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    2. Chisari, Omar O. & Rodríguez-Pardina, Martín, 1998. "Algunos determinantes de la inversión en sectores de infraestructura en la Argentina," Series Históricas 7445, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Henrique Monteiro, 2005. "Water Pricing Models: a survey," Others 0510002, University Library of Munich, Germany.
    4. Helmuth Cremer & Firouz Gahvari, 2017. "Restoring Ramsey tax lessons to Mirrleesian tax settings: Atkinson–Stiglitz and Ramsey reconciled," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(1), pages 11-35, June.
    5. Yann Braouezec & John Cagnol, 2023. "Theoretical Foundations of Community Rating by a Private Monopolist Insurer: Framework, Regulation, and Numerical Analysis," Papers 2309.15269, arXiv.org, revised Dec 2023.
    6. Gustavo Ferro & Omar O. Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.
    7. Jörg Borrmann, 2003. "A Simple Characterization of the Second‐best Two‐part and Block‐rate Tariffs Theory and Applications," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 74(2), pages 205-228, June.
    8. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 95-119, march.
    9. Briglauer, Wolfgang & Holzleitner, Christian, 2014. "Efficient contracts for government intervention in promoting next generation communications networks," ZEW Discussion Papers 14-022, ZEW - Leibniz Centre for European Economic Research.
    10. J. Elnaboulsi, 2001. "Nonlinear Pricing and Capacity Planning for Water and Wastewater Services," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 15(1), pages 55-69, February.
    11. Edmond Baranes, 1998. "Réglementation et ouverture à la concurrence des activités en réseaux : le cas des télécommunications," Revue Française d'Économie, Programme National Persée, vol. 13(4), pages 161-186.
    12. Hörcher, Daniel & Tirachini, Alejandro, 2021. "A review of public transport economics," Economics of Transportation, Elsevier, vol. 25(C).
    13. Fan Zhang, 2007. "Does Electricity Restructuring Work? Evidence From The U.S. Nuclear Energy Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 397-418, September.
    14. Ryan P. Scott & Tyler A. Scott & Robert A. Greer, 2022. "Who owns the pipes? Utility ownership, infrastructure conditions, and methane emissions in United States natural gas distribution," Review of Policy Research, Policy Studies Organization, vol. 39(2), pages 170-198, March.
    15. Diakité, Daouda & Semenov, Aggey & Thomas, Alban, 2009. "A proposal for social pricing of water supply in Côte d'Ivoire," Journal of Development Economics, Elsevier, vol. 88(2), pages 258-268, March.
    16. Jihad Elnaboulsi, 2009. "An Incentive Water Pricing Policy for Sustainable Water Use," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(4), pages 451-469, April.
    17. Walter Cont & Fernando Navajas & Francisco Pizzi & Alberto Porto, 2020. "Precios y tarifas de servicios públicos. Evolución. 1945-2018," Asociación Argentina de Economía Política: Working Papers 4328, Asociación Argentina de Economía Política.
    18. Eugenio J. Miravete, "undated". "Quantity Discounts for Taste-Varying Consumers," CARESS Working Papres 99-11, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    19. John Freebairn, 1998. "Access Prices for Rail Infrastructure," The Economic Record, The Economic Society of Australia, vol. 74(226), pages 286-296, September.
    20. David, Laurent & Le Breton, Michel & Merillon, Olivier, 2007. "Kolm as a Contributor to Public Utility Pricing, Second Best Culture and the Theory of Regulation," IDEI Working Papers 490, Institut d'Économie Industrielle (IDEI), Toulouse.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:kyklos:v:58:y:2005:i:3:p:331-351. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.