Explaining State Regulatory Actions

  • Dale E. Lehman
  • Dennis L. Weisman
Part of the Topics in Regulatory Economics and Policy Series book series (TREP, volume 36)


We have seen that jurisdictional fragmentation could cause the FCC to set wholesale prices below cost. We have also seen that the FCC’s “efficient-firm” standard rests on a weak theoretical foundation but is capable of producing low wholesale prices. We have presented evidence that the wholesale prices set as a result of the Act are below forward-looking costs, absent adoption of a speculative forward-looking cost standard—a standard fraught with legal, economic, and practical difficulties. It is the state regulators who set these wholesale prices. Why would state regulators have chosen this cost/price standard? This is particularly surprising given that these wholesale prices threaten to unravel an elaborate system of politically-sensitive retail cross-subsidies that state regulators have constructed over the past decades. We believe the answer lies in the unwitting role played by a decade of regulatory reform.


Entry Barrier Incumbent Firm Wholesale Prex Moral Hazard Problem Competitive Entry 
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Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Dale E. Lehman
    • 1
  • Dennis L. Weisman
    • 2
  1. 1.Fort Lewis CollegeUSA
  2. 2.Kansas State UniversityUSA

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