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Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912

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  • Weiman, David F
  • Levin, Richard C

Abstract

Focusing on the Southern Bell Telephone Company, the authors propose a modified version of the predation hypothesis to explain Bell's 'natural' monopoly over local telephone service. Southern Bell effectively eliminated competition through a strategy of pricing below cost in response to entry, which deprived competitors of the cash flow required for expansion even if it failed to induce exit; investing in toll lines ahead of demand, isolating independent companies in smaller towns and rural areas, and forcing them to consolidate on favorable terms; and influencing local regulatory policy in larger cities to weaken rivals and ultimately to institutionalize the Bell monopoly. Copyright 1994 by University of Chicago Press.

Suggested Citation

  • Weiman, David F & Levin, Richard C, 1994. "Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 103-126, February.
    • Handle: RePEc:ucp:jpolec:v:102:y:1994:i:1:p:103-26
    DOI: 10.1086/261923
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    References listed on IDEAS

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    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Lipartito, Kenneth, 1989. "System Building at the Margin: The Problem of Public Choice in the Telephone Industry," The Journal of Economic History, Cambridge University Press, vol. 49(2), pages 323-336, June.
    3. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
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    Cited by:

    1. Stephen Martin, 2015. "Areeda–Turner and the Treatment of Exclusionary Pricing under U.S. Antitrust and EU Competition Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 229-252, May.
    2. Farasat A.S. Bokhari & Weijie Yan, 2020. "Product line extensions under the threat of entry: evidence from the UK pharmaceuticals market," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2020-04, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    3. Dennis W. Carlton & Randal C. Picker, 2014. "Antitrust and Regulation," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 25-61, National Bureau of Economic Research, Inc.
    4. Fiona Scott Morton, 1997. "Entry and Predation: British Shipping Cartels 1879–1929," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 679-724, December.
    5. Amanda B. Delp & John W. Mayo, 2017. "The Evolution of “Competition”: Lessons for 21st Century Telecommunications Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(4), pages 393-416, June.
    6. Nicholas Economides, 2003. "Telecommunications Regulation: An Introduction," Working Papers 03-22, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Kaserman, David L. & Mayo, John W., 1999. "Regulatory policies toward local exchange companies under emerging competition: guardrails or speed bumps on the information highway?," Information Economics and Policy, Elsevier, vol. 11(4), pages 367-388, December.
    8. de Haas, Samuel & Herold, Daniel & Schäfer, Jan Thomas, 2022. "Entry deterrence due to brand proliferation: Empirical evidence from the German interurban bus industry," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    9. Bernard, Darren, 2016. "Is the risk of product market predation a cost of disclosure?," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 305-325.

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