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How Much Competition is Enough Competition for Regulatory Forbearance?

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Listed:
  • Weisman Dennis L.

    (Department of Economics, Kansas State University, Manhattan, KS, 66506-4001, USA)

Abstract

Critical loss analysis is used to define product markets for merger analysis and determine if market forces are sufficient to discipline prices in transitionally competitive regulated markets. Unlike the approval of a merger, however, regulatory forbearance is a reversible act. The threat of future (re)-regulation, or regulatory contestability, in combination with high price-cost margins and complementary demands can lower the critical loss (elasticity) necessary to justify the competitive classification of regulated services. This suggests that the intensity of competition sufficient to forbear from regulation can be considerably less than what regulators may believe is required a priori.

Suggested Citation

  • Weisman Dennis L., 2024. "How Much Competition is Enough Competition for Regulatory Forbearance?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 24(4), pages 1209-1222.
    • Handle: RePEc:bpj:bejeap:v:24:y:2024:i:4:p:1209-1222:n:1011
    DOI: 10.1515/bejeap-2024-0143
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    More about this item

    Keywords

    critical elasticities; competition; economic regulation; regulatory forbearance; contestability; telecommunications;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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