Abstract
Optimal firm size and patterns of returns to scaleamong the local exchange companies in the U.S.telecommunications industry are estimated for theyears: 1975, 1978, 1981, 1984, 1987 and 1990. Theindependent companies display increasing returns toscale, while the Baby Bells display constant ordecreasing returns to scale. The independentcompanies operate at a scale smaller than optimalsize, while the Baby Bells operate at a scale greaterthan optimal size. Efficiencies can be gained byindustry restructuring, by allowing independents toexpand their size while the Baby Bells can bedownsized to create smaller units.
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Majumdar, S.K., Chang, HH. Optimal Local Exchange Carrier Size. Review of Industrial Organization 13, 637–649 (1998). https://doi.org/10.1023/A:1007791027229
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DOI: https://doi.org/10.1023/A:1007791027229