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A Market Test for Natural Monopoly in Local Exchange

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  • Berg, Sanford V
  • Tschirhart, John

Abstract

Is the incumbent local exchange carrier (LEC) a natural monopolist? The analysis indicates that the LEC cost function is not supportable: LECs appear to be either nonsustainable natural monopolies or nonnatural monopolies the set of services they currently offer. However, recent technological changes suggest that whether LECs are natural monopolies over their current offerings is immaterial for policy making, because competitors are enjoying economies of scope in offering both LEC and non LEC services. Based on these results, deregulation of LECs is discussed in a Type I/Type II error framework. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Berg, Sanford V & Tschirhart, John, 1995. "A Market Test for Natural Monopoly in Local Exchange," Journal of Regulatory Economics, Springer, vol. 8(2), pages 103-124, September.
    • Handle: RePEc:kap:regeco:v:8:y:1995:i:2:p:103-24
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    Cited by:

    1. Russell Pittman, 2001. "Vertical Restructuring of the Infrastructure Sectors of Transition Economies," Industrial Organization 0111002, University Library of Munich, Germany.
    2. Jamison, Mark A., 1996. "General conditions for subsidy-free prices," Journal of Economics and Business, Elsevier, vol. 48(4), pages 371-385, October.
    3. Harry Bloch & Gary Madden & Scott Savage, 2001. "Economies of Scale and Scope in Australian Telecommunications," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(2), pages 219-227, March.
    4. Russell Pittman, 2003. "Vertical Restructuring (or Not) of the Infrastructure Sectors of Transition Economies," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 5-26, March.
    5. Stefan Buehler, 2000. "Is Swiss Telecommunications a Natural Monopoly? An Evaluation of Empirical Evidence," SOI - Working Papers 0001, Socioeconomic Institute - University of Zurich.

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