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Price convergence in contestable market structures: The impact of time and price-caps on intercity telecommunications rates

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Abstract

In this study, we tested if long-distance rates among AT&T, MCI, and US Sprint between New York City and six major SMSAs during 1980–91 have converged. Empirical findings show that rates have converged over time, that rate ratios or differences increased under price cap, and that distance does not have any impact on rate convergence. The variables of TIME and price cap (CAP) have greater impacts on rate convergence for AT&T/US Sprint than AT&T/MCI. Regression results based on pooled cross-section and time-series data yield better results.

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Authors and Affiliations

  1. Department of Economics and Business Research, Southeastern Louisiana University, SLU Station, Box 813, 70402, Hammond, LA, USA

    Yu Hsing

  2. Department of Economics and International Business, The University of Southern Mississippi, USM Station, Box 5072, 39406, Hattiesburg, MS, USA

    Franklin G. Mixon Jr.

Authors
  1. Yu Hsing
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  2. Franklin G. Mixon Jr.
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Additional information

The authors thank Dan Grosh, legal counsel of the Federal Communications Commission, and two anonymous referees of this journal for helpful comments and suggestions. The usual caveat applies.

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Hsing, Y., Mixon, F.G. Price convergence in contestable market structures: The impact of time and price-caps on intercity telecommunications rates. Rev Ind Organ 9, 813–822 (1994). https://doi.org/10.1007/BF01026586

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