Price Caps and Incentive Regulation in Telecommunications PDF
Preview Price Caps and Incentive Regulation in Telecommunications
PRICE CAPS AND INCENTIVE REGULATION IN TELECOMMUNICATIONS Topics in Regulatory Economics and Policy Series Michael A. Crew, Editor Graduate School of Management Rutgers University Newark, New Jersey, U.S.A. Other Books in the Series: Rowley, C., R. Tollison, and G. Tullock Political Economy ofR ent Seeking Frantz, R.: X-Efficiency: Theory, Evidence and Applications Crew, M: Deregulation and Diversification of Utilities Shogren, J.: The Political Economy of Government Regulation Hillman, J. and R. Braeutigam: Price Level Regulation for Diversified Public Utilities Crew, M.: Competition and the Regulation of Utilities PRICE CAPS AND INCENTIVE REGULATION IN TELECOMMUNICATIONS edited by Michael A. Einhorn Rutgers University Newark, New Jersey ~. Springer Science+Business Media, LLC " Library of Congress Cataloging-in-Publication Data Price eaps and ineentive regulation in teleeommunications / edited by Miehael A. Einhorn. p. em. - (Topies in regulatory eeonomics and poliey series ; 6) Inc1udes bibliographical referenees. ISBN 978-1-4613-6776-5 ISBN 978-1-4615-3976-6 (eBook) DOI 10.1007/978-1-4615-3976-6 1. Telephone-United States-Deregulation. 2. Price regulation- -United States. I. Einhorn, Miehael A. II. Series: Topics in regulatory eeonomics and poliey ; 6. HE8819.P75 1990 384.6'3'0973-de20 90-33723 CIP Copyright © 1991 by Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 1991 Softeover reprint ofthe hardcover lst edition 1991 Ali rights reserved. No part of this publieation may be reproduced, stored in a retrieval system ar transmitted in any form orby any means, mechanical, photo-copying, recarding, ar otherwise, without the prior written permission of the publisher, Springer Science+Business Media, LLC. Prillted 011 acid-free paper. To Jan CONTENTS Contributing Authors ix Acknowledgments xi 1 Introduction 1 Michael A. Einhorn 2 A Non-Bayesian Incentive Mechanism Using 15 Two-Part Tariffs Ingo Vogelsang 3 Regulating by Capping Prices 33 Timothy J. Brennan 4 Information, Incentives, and Commitment in 47 Regulatory Mechanisms: Regulatory Innovation in Telecommunications David P. Baron 5 Productivity and Price Caps in Telecommunications 77 John E. Kwoka, Jr. 6 Constant and Variable Productivity Adjustments for 95 Price-Cap Regulation Ferenc Kiss 7 A Sequential Mechanism for Direct Price 127 Regulation Peter B. Linhart, Roy Radner, and Frank W. Sinden vii viii PRICE CAPS AND INCENTIVE REGULATION IN TELECOMMUNICATIONS 8 Incentives for Cost Reduction Under Price-Cap 155 Regulation Luis M.B. Cabral and Michael H. Riordan 9 The Quality of Regulation in Regulating Quality: 167 A Proposal for an Integrated Incentive Approach to Telephone Service Performance Eli M. Noam 10 Optional Tariffs for Access Under the FCC's 191 Price-Cap Proposal David S. Sibley, Daniel P. Heyman, and William E. Taylor 11 Optional Calling Plans and Bypass Efficiency 207 Michael A. Einhorn 12 Pricing and Investment Incentives Under Price 221 Ceiling Regulation Calvin S. Monson and Alexander C. Larson Index 239 Contributing Authors David P. Baron, William R. Kimball Professor of Business, Economics, and the Environment, Graduate School of Business, Stanford University, Stanford, California Timothy J. Brennan, Associate Professor of Public Policy, Communication, and Economics, George Washington University, Washington, D.C. Luis M. B. Cabral, Assistant Professor of Economics, New University of Lisbon, Lisbon, Portugal Michael A. Einhorn, Assistant Professor of Economics, Rutgers University, Newark, New Jersey Daniel P. Heyman, Distinguished Member of Technical Staff, Bell Communications Research, Morristown, New Jersey Ferenc Kiss, Member of Technical Staff, Bell Communications Research, Livingston, New Jersey John E. Kwoka, Jr., Professor of Economics, George Washington University, Washington, D.C.; Special Assistant to the Chief, Common Carrier Bureau, Federal Communications Commission, Washington, D.C. Alexander C. Larson, Senior Economist, Southwestern Bell, S1. Louis, Missouri Peter B. Linhart, Distinguished Member of Technical Staff, AT&T Bell Laboratories, Murray Hill, New Jersey Calvin S. Monson, Economist, Southwestern Bell, S1. Louis, Missouri Eli M. Noam, Professor of Business, Graduate School of Business, Columbia University, New York, New York; former Commissioner, New York Public Service Commission, Albany, New York Roy Radner, Distinguished Member of Technical Staff, AT&T Bell Laboratories, Murray Hill, New Jersey; Research Professor of Economics, New York University, New Yark Michael H. Riordan, Professor of Economics, Boston University, Boston, W,.assachusetts ix x PRICE CAPS AND INCENITVE REGULATION IN TELECOMMUNICATIONS David S. Sibley, District Manager, Economic Research Group, Bell Communications Research, Morristown, New Jersey Frank W. Sinden, Distinguished Member of Technical S taff, AT&T Bell Laboratories, Murray Hill, New Jersey William E. Taylor, Vice President, National Economic Research Associates, Boston, Massachusetts Ingo Vogelsang, Professor of Economics, Boston University, Boston, Massachusetts Acknowledgments In the course of preparing this book, I have benefitted from the efforts of many individuals. The Columbia University Center for Telecommunications and Infor- mation Studies sponsored a one-day conference in 1987 in which four volume papers were presented; Douglas Conn, Richard Kramer, Martin Elton, and Barry Cole of the Center were prominent organizers in this event David Hosford (Rutgers University-Newark) provided additional funding for the conference; Peter Linhart (AT&T), David Sappington (University of Florida) and David Sibley (Bell Communications Research) gave much appreciated technical advice. Bar- bara Ryder (Kluwer Academic Publishers) provided clerical assistance in graph preparation; Linda Brennan (Rutgers University-Newark) prepared each ofthe final manuscripts for publication, a time-consuming and sometimes tedious task that she performed exceptionally. Zachary Rolnik of Kluwer was a warm and encouraging adviser who kept up my spirits during a long document preparation process. Final thanks must go to each of the authors who really did make the volume possible. To these individuals, my heartfelt thanks. xi
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