IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v145y2006i1p251-26310.1007-s10479-006-0033-8.html
   My bibliography  Save this article

Was the bell system a natural monopoly? An application of data envelopment analysis

Author

Listed:
  • Hsihui Chang
  • Raj Mashruwala

Abstract

Examination of the relation between scale economies and natural monopoly has been a central issue in public policy research. The paper employs Data Envelopment Analysis (DEA) methodology to re-examine the issue of natural monopoly for the Bell system with annual time series data for 1947--1977. Results from the DEA-based statistical tests reveal the prevalence of increasing returns to scale for the Bell system, implying that there were economies of scale for the Bell system. This evidence suggests that the Bell data was indeed consistent with a natural monopoly. Further, the results indicate that the low level of overall efficiency primarily results from allocative inefficiency rather than technical and scale inefficiency. Copyright Springer Science+Business Media, LLC 2006

Suggested Citation

  • Hsihui Chang & Raj Mashruwala, 2006. "Was the bell system a natural monopoly? An application of data envelopment analysis," Annals of Operations Research, Springer, vol. 145(1), pages 251-263, July.
    • Handle: RePEc:spr:annopr:v:145:y:2006:i:1:p:251-263:10.1007/s10479-006-0033-8
    DOI: 10.1007/s10479-006-0033-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10479-006-0033-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10479-006-0033-8?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Banker, Rajiv D. & Chang, Hsihui, 1995. "A simulation study of hypothesis tests for differences in efficiencies," International Journal of Production Economics, Elsevier, vol. 39(1-2), pages 37-54, April.
    2. Evans, David S & Heckman, James J, 1984. "A Test for Subadditivity of the Cost Function with an Application to the Bell System," American Economic Review, American Economic Association, vol. 74(4), pages 615-623, September.
    3. Banker, Rajiv D., 1984. "Estimating most productive scale size using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 17(1), pages 35-44, July.
    4. Roller, Lars-Hendrik, 1990. "Proper Quadratic Cost Functions with an Application to the Bell System," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 202-210, May.
    5. Charnes, A & Cooper, William W & Schinnar, AP, 1982. "Transforms and approximations in cost and production function relations," Omega, Elsevier, vol. 10(2), pages 207-211.
    6. Rajiv D. Banker, 1993. "Maximum Likelihood, Consistency and Data Envelopment Analysis: A Statistical Foundation," Management Science, INFORMS, vol. 39(10), pages 1265-1273, October.
    7. David S. Evans & James J. Heckman, 1988. "Rejoinder---Natural Monopoly and the Bell System: Response to Charnes, Cooper and Sueyoshi," Management Science, INFORMS, vol. 34(1), pages 27-38, January.
    8. Banker, Rajiv D & Maindiratta, Ajay, 1988. "Nonparametric Analysis of Technical and Allocative Efficiencies in Production," Econometrica, Econometric Society, vol. 56(6), pages 1315-1332, November.
    9. Gold, Bela, 1981. "Changing Perspectives on Size, Scale, and Returns: An Interpretive Survey," Journal of Economic Literature, American Economic Association, vol. 19(1), pages 5-33, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rajiv Banker & Hsihui Chang & Ehsan Feroz, 2014. "Performance measurement in nonprofit governance: an empirical study of the Minnesota independent school districts," Annals of Operations Research, Springer, vol. 221(1), pages 47-71, October.
    2. Yu-Chen Lin & Hsihui Chang & Jengfang Chen & Guan-Syun Wu, 2014. "Accounting disclosure quality, capital market intensity and national productivity," Annals of Operations Research, Springer, vol. 221(1), pages 239-254, October.
    3. H Chang & C Galantine & A Thevaranjan, 2009. "Returns to scale pattern and efficient firm size in the public accounting industry: an empirical investigation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(11), pages 1495-1501, November.
    4. Barnabé Walheer, 2019. "Dynamic directional nonparametric profit efficiency analysis for a single decision-making unit: an aggregation approach," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 41(4), pages 1123-1149, December.

    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. Das, Nibedita, 2000. "Technology, efficiency and sustainability of competition in the Indian telecommunications sector," Information Economics and Policy, Elsevier, vol. 12(2), pages 133-154, June.
    2. Hsihui Chang & Hiu Choy & Iny Hwang, 2015. "An empirical study of returns to scale of CPA firms in the post SOX era," Annals of Operations Research, Springer, vol. 229(1), pages 253-264, June.
    3. Forsund, Finn R. & Sarafoglou, Nikias, 2005. "The tale of two research communities: The diffusion of research on productive efficiency," International Journal of Production Economics, Elsevier, vol. 98(1), pages 17-40, October.
    4. Bozec, Richard & Dia, Mohamed, 2007. "Board structure and firm technical efficiency: Evidence from Canadian state-owned enterprises," European Journal of Operational Research, Elsevier, vol. 177(3), pages 1734-1750, March.
    5. Maher, Maria E., 1999. "Access costs and entry in the local telecommunications network: a case for de-averaged rates," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 593-609, May.
    6. Harry Bloch & Gary Madden & Grant Coble‐Neal & Scott J. Savage, 2001. "The Cost Structure of Australian Telecommunications," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 338-350, December.
    7. Banker, Rajiv D. & Janakiraman, Surya & Natarajan, Ram, 2004. "Analysis of trends in technical and allocative efficiency: An application to Texas public school districts," European Journal of Operational Research, Elsevier, vol. 154(2), pages 477-491, April.
    8. Gary Madden & Harry Bloch & Grant Coble-Neal, 2002. "Labour and capital saving technical change in telecommunications," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1821-1828.
    9. Christodoulopoulos, Th., 1995. "Telecommunications in Greece: A study of production structure and natural monopoly issue," International Journal of Production Economics, Elsevier, vol. 38(2-3), pages 147-157, March.
    10. Banker, Rajiv D. & Chang, Hsihui & Lee, Seok-Young, 2010. "Differential impact of Korean banking system reforms on bank productivity," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1450-1460, July.
    11. Yang, Guo-liang & Rousseau, Ronald & Yang, Li-ying & Liu, Wen-bin, 2014. "A study on directional returns to scale," Journal of Informetrics, Elsevier, vol. 8(3), pages 628-641.
    12. Lucinda, Claudio Ribeiro & Anuatti, Francisco, 2017. "Economies of Scale and Scope in the Sanitation Sector," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 37(2), November.
    13. 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.
    14. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2008. "Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology," Operations Research, INFORMS, vol. 56(1), pages 204-221, February.
    15. Kuosmanen, Timo & Post, Thierry & Scholtes, Stefan, 2007. "Non-parametric tests of productive efficiency with errors-in-variables," Journal of Econometrics, Elsevier, vol. 136(1), pages 131-162, January.
    16. Voigt, Peter, 2004. "Russlands Weg vom Plan zum Markt: Sektorale Trends und regionale Spezifika. Eine Analyse der Produktivitäts- und Effizienzentwicklungen in der Transformationsphase," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 28, number 93021.
    17. Kjoeserud,G.G. & Kvamme,O.J. & Kittelsen,S.A.C., 2001. "Errors in survey based quality evaluation variables in efficiency models of primary care physicians," Memorandum 24/2001, Oslo University, Department of Economics.
    18. Robert G. Chambers & Atakelty Hailu & John Quiggin, 2011. "Event‐specific data envelopment models and efficiency analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), pages 90-106, January.
    19. Chavas, Jean-Paul & Cox, Thomas L., 1999. "A Generalized Distance Function And The Analysis Of Production Efficiency," Staff Papers 12601, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    20. Paweł Dziewulski, 2008. "Konkurencja na rynku telekomunikacyjnym przy asymetrycznym dostępie do infrastruktury," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 47-69.

    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:spr:annopr:v:145:y:2006:i:1:p:251-263:10.1007/s10479-006-0033-8. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.