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Price caps: a rational means to protect telecommunications consumers and competition.

Price Caps: A Rational Means to Protect Telecommunications Consumers and Competition

The Federal Communications Commission (FCC) has recently announced a fundamental revision in its method of regulating telecommunications carriers (FCC announcement, May 12, 1988). Specifically, the FCC has decided to replace its current rate of return regulation by an approach based on price caps. The purpose is to prevent excessive prices in markets in which the FCC is not certain that competition is sufficiently powerful by itself to preclude overpricing, while avoiding the substantial social costs of rate of return regulation. This article seeks to describe the economic logic of th FCC's propoasal which will offer regulated firms a built-in and powerful incentive for productivity growth that has long been denied to them. In the long run, consumers should benefit substantially.1

Benefits of Price Cap Regulation

Price cap regulation has two prime virtues. First, it directly controls price, the item that really matters to consumers, instead of some related variable (earnings) that does not immediately affect consumer welfare and that can, at best, affect prices only by indirection. Second, price caps are the one regulatory mechanism that can be shown analytically to be capable of following the competitive market model in offering to consumers all the price protection that can be provided to them by effective competition.

Under traditional forms of rate regulation, rate of return rather than price served as the instrument of control. But it is price and not the suppliers rate of return that directly affects the economic welfare of its customers. Who can disagree that customers are better off if the supplier earns 20 percent on its investment by selling its product at a price of $50, than if the company's profit rate is reduced to 12 percent, but the price of its product is simultaneously raised to $75?

True, rate of return regulation does ultimately influence prices, more or less indirectly, but the workings of its effects are complex and often even the direction of its influence may be difficult to predict and will not always favor consumers. The tendency, for many years, of rate of return regulation to force firms to charge prices higher than those they themselves proposed, while in part attributable to other considerations, can hardly be described as a triumph of the regulatory protection of consumers. Price cap regulation puts an end to all that by ensuring that the regulatory mechanism pursues the goal of preventing excessive prices; it thus pursues the objective that genuinely matters for consumers' economic welfare.

Price caps, properly designed, also are consistent with the competitive model. Economic analysis shows that in the presence of economies of scale and scope, competition neither can nor should prevent firms from tailoring prices to correspond to the current state of market demand. But competition protects consumer interests by setting bounds to that price-setting freedom. In particular, competitive forces preclude, at least in the long run, any prices high enough to make the market vulnerable to takeover by entrants. Thus, the competitive market mechanism protects consumers from monopolistic prices through the enforcement of what amounts to a set of caps upon prices. The new regulatory mechanism will work by approximating the behavior of ideal competitive arrangements, just as it should.

The price cap approach promises three additional important benefits. First, it will end reliance upon the admittedly arbitrary "fully distributed costs" -- numbers that serve as the traditional regulatory standard for setting prices. Fully allocated costs are cost figures produced by more or less conventional allocation procedures used to divide up indivisible costs, such as the salary of the president of the company, among the various company products, using some arbitrary rule of thumb to assign 3.28 percent of the salary to product X, 12.74 percent to product Y, etc. The prices that regulators select on the basis of such a full cost allocation procedure will turn out to be "right" only by incredible coincidence. That is, they cannot be relied upon normally to approximate the prices that free competitive market forces would elicit.(2)

Second, the price cap approach promises to stimulate innovation and productivity growth. Price caps will deal effectively for the first time with what has long been an albatross about the regulator's neck -- the fact that ruling out any profits attributable to the exercise of market power also denies any legitimate return to superior performance in terms of efficiency, innovation and productivity growth. Earnings that exceed the firm's cost of capital sometimes are attributable to monopoly power, but often they are ascribable to superior innovation performance by the firm. Because there is no practical way of always proving from which of these two sources high earnings of a particular firm come, regulators have effectively been forced under a rate of return regime to prohibit all earnings, whatever their source, above some level selected by the regulators as the "fair" return. It is clear that this effectively deprived the regulated firm of the opportunity to earn a financial reward through superiority in its productivity performance. Indeed, because innovation is inherently very risky, and requires great effort and expense, it is surprising that the productivity growth record of at least some regulated industries has been as substantial as it in fact has been. Even so, one can be confident that without the imposed disincentives to innovation, the performance would have been even better.

The price cap procedure will change all that, too. By permitting the regulated firm to enhance its earnings through any reductions in its costs that are unaccompanied by any rise in prices, it restores the incentives for efficiency enhancements through process innovations and any other available means. In addition, under the new regime, by permitting new products to be offered (temporarily) free of price caps, the free market's incentives for product innovations will, to some degree, be restored. These incentives for enhanced productivity growth may well be the most urgent reason, in terms of the public interest, for instituting the price cap approach.

Third, price caps facilitate a gradual transition toward the streamlining of regulation, without the serious distortions that such an incremental procedure is sure to bring under the current regulatory structure. Several recent administrations, encompassing both major political parties, have agreed to the desirability of the narrowing and partial elimination of regulatory controls, and the streamlining of those that it was deemed desirable to retain. The FCC has been moving in this direction, sometimes employing a step by step (i.e., service by service) approach to the streamlining of regulation.

Rate of return regulation, however, poses a fundamental problem for this incremental approach. When the regulated firm's services are divided into two groups, half of them regulated and half of them free, as it were, rate of return regulation becomes all but unworkable.(3) Attempts to repair its deficiencies in these circumstances become major impediments to efficiency in themselves. Where technologically related services that share common facilities and which consequently constitute sources of economies of scope are divided between the regulated and the deregulated categories, the portion of the common investment costs appropriately associated with those services that remain fully regulated becomes impossible to determine, except by arbitrary convention. Suspicion of cross subsidy is inevitably engendered, but impossible to test, on a rate of return criterion. All of this predictably forces the regulatory agency to ensnare itself in the toils of an even more complex and less defensible system of price setting by means of full cost allocation, from which only reformed regulation can liberate it.

Potential Costs of Price Cap Regulation

Ideally, the only disadvantages of price cap regulation are its administrative costs, because, properly designed, price caps ensure that the price-setting rules of the free competitive market will be followed, and that they constrain behavior no more than that. In practice, of course, nothing is administered perfectly, and so a price cap approach is sure to exact some social costs beyond their mere administrative burden. And that is why a competitive market mechanism, where it is available, is to be preferred.

The fundamental shortcoming of price cap regulation is the danger that the price caps will be set at inappropriate levels. At best, these figures will constitute only approximations to their ideal values, a subject to which we will return presently. In practice, these approximations may be highly imperfect as a result of errors, limitations of data or methods, or even because of political or other interference. Consequently, in the real world one can expect price cap figures to represent compromises, which differ to a smaller or greater degree from their theoretically ideal levels.

Where the value of the cap is set too high, and if competition is not an effective constraint upon price, consumers are likely to be harmed by prices that are higher than the competitive levels. Where the figure chosen for a price cap is excessively low, it will be the regulated firm that will suffer initially; but as always, in the long run, the consumer will bear the cost. In this case, the cost will result from inadequate investment, foregone innovation opportunities, and perhaps a reduction in the vitality of competition, all of these adding up to poorer service and higher prices than those that otherwise would have prevailed.

Excessively low price caps, like excessively low rates imposed under rate of return regulation, can threaten the viability of smaller and younger firms in the industry, thereby creating the false impression that competition simply is not viable. In established firms such low rates must be subsidized by buyers of other products of the regulated firm, if that firm is to be able to survive. Such problems can be self-aggravating and self-perpetuating, as pressures from the retention of the subsidized rates can be expected to feed upon themselves by encouraging the beneficiaries to fight for their preservation.

It should be noted that such problems are more likely to arise the greater the number of price cap categories adopted, for each additional price cap figure poses the added danger that price will be driven administratively from its competitive level. That is one of the main reasons for adopting a set of price caps that are more aggregative, covering fairly broad categories of services with only a single overall price ceiling for each such category.

Operating Price Caps: Proposed

Mechanisms and Their Logic

We turn next to the issues of how a price cap approach should be operated if it is simultaneously to protect the interests of consumers, deal effectively with the legitimate concerns of competitors of the regulated firm, and yet serve the goal of minimizing interference with the workings of the market mechanism, noting in connection with each suggested feature how it compares with the new FCC rules. In the remainder of this paper, we will deal with the issues involved in sequence, in each case showing the economic logic of the measure proposed for the purpose.

Initial Price Caps: There is much to be said for use of current rates as the inaugural price cap figures, as the FCC has proposed to do. Current rates are the most readily available of defensible values and thus are attractive on purely practical grounds, and they also have presumably received thorough review by the Commission and interested parties, affording additional comfort that their overall level is not unreasonable. A further ground for using current rates in initiating price cap regulation is that this will ensure that consumers will be at least as well off on the starting date of the system as they were before. Then, as competitive forces and the automatic adjustment mechanism come into play to drive prices below existing rates, consumers will benefit further.

An arrangement which establishes caps only upon the average rate in a broad category of services, as the FCC also has done, offers the regulated firm some degree of flexibility in setting individual rates, so long as those rates together do not yield an average figure which exceeds the price cap.4 However, the Commission has chosen to constrain any flexibility in price setting by requiring that prices not be increased or reduced at a rate faster than five percent per annum. While there is something to be said against excessive rapidity of price adjustments, and the high readjustment costs that are apt to result, the five percent figure needs careful consideration to determine whether it is not overly constraining.

Automatic Price Cap Adjustment to Changing Economic Conditions: After the initial price cap figures are selected by the methods just described, they will have to be modified from time to time as economic conditions evolve. In particular, they will have to be adjusted to take account of any increases in costs of the regulated firm imposed by inflationary pressures -- a step which has persistently troubled the regulatory agencies.

In the past, these agencies have tended to prefer full dress reviews whenever inflationary pressures threatened the viability of the regulated firm. But such reviews are slow, costly and tend to yield decisions whose relationship to the requirements of economic efficiency are haphazard at best. In contrast, the procedure that lies at the heart of the productivity incentive mechanism of the price cap regime is automatic. It works something like an automatic inflation escalator in a wage contract, but with built in inducements for efficiency, and provisions preventing the adjustments from becoming excessive. In addition, such an adjustment must be influenced by expected changes in the firm's productivity.

A primary purpose of the proposed new regulatory arrangement is to stimulate the growth of productivity and the flow of innovation. For this purpose, it is necessary that the regulated firms be permitted to retain a suitable portion of the benefits resulting from any such improvements it contributes, in order to provide the incentives necessary to elicit them. But an appropriate portion of the benefits should also be passed on to the general public, as will occur in a competitive market. That, after all, is a principal public interest objective of the revised arrangement.

What mechanism can the regulatory agency employ to ensure that the public does in fact receive a suitable share of these gains? The very attractive approach adopted by the FCC builds the benefit sharing directly into the automatic inflation adjustment. At the periodic price cap adjustment dates, instead of simply raising the price caps to match the rate of increase of some price index, serving as the measure of inflation, it will deduct from the rate of increase in the price index an amount which we will call X, and which can be interpreted as the productivity pass through to the consuming public. X, therefore, represents the automatic reduction in the real levels of the price caps, intended to constitute the share of the industry productivity achievements that will accrue immediately to the public.

For brevity, we will refer to this approach as "price index minus X." Specifically, one starts from the current annual percentage growth rate in the selected price index and X is a predetermined percentage number representing a productivity growth target, which would remain in effect for an extended period (say, four years, as in the FCC decision) and be subject to monitoring. Under this approach, each year the level of each price cap will rise or fall by the percentage equal to the prior year's value of price index minus X.(5)

The price index that FCC has chosen for this calculation is the GNP fixed-weighted price, which is based on a weighted average of the prices of all the items that enter the GNP. Since it includes both produced finished inputs such as machine tools as well as consumers' goods it probably comes closer to measuring changes in the costs facing a business firm than does the consumer price index. One might well argue that an index tailored more closely to the prices of telecommunications inputs might have been more suitable. However, since no price index can be perfect this is perhaps not worth pursuing. For its productivity growth target the FCC plan is that:

... carriers subject to price caps would be required to cut their rates to reflect a projected productivity increase of 3 percent each year over and above economy-wide productivity increases in the United States. Over the first four years of the plan these price cuts would result in real rate reductions of $9.6 billion, if applied to the industry as a whole. Of this amount, the FCC estimates that consumers will save ... $1.6 billion more than would occur under current regulation - savings due to productivity increases directly attributable to the better incentives created by price cap regulation. (FCC Statement, May 12, 1988,p.1.)

Thus the FCC's plan is to base X on what it judges the past productivity growth achievements of the telecommunications industry to have been, plus a share of the additions to productivity growth the Commission expects the new regulatory regime to elicit. While this tough pass-through provision may indeed benefit consumers, some care will have to be exercised in monitoring its workings to make sure that it does not effectively prevent the firms from earning adequate revenues, thereby leading to insufficiency of investment from the viewpoint of the public interest.

The logic of the productivity incentive mechanism in the price cap adjustment plan is straightforward. If a regulated firm's productivity growth performance happens to fall short of the target, it automatically suffers a penalty similar to that which a firm in a free competitive market is subject if its productivity growth lags behind that of its competitors. For example, if input prices were rising at a rate of seven percent per year and this is correctly measured by the GNP price index, with the productivity growth target set at three percent, then under the new arrangements, the price caps will be permitted to rise at a rate equal to seven minus three percent, i.e., at an annual rate of four percent. If, however, the enterprise in question were actually to achieve only a two percent productivity gain, its actual costs would rise at a rate of 7-2=5 percent, so that its penalty would consist of the fact that the cap on its prices would rise more slowly than its actual costs, thereby squeezing its profits. The reverse would be true if the regulated firm's productivity performance were to exceed the productivity target, and the resulting loosening of the bounds upon prices and profits would serve as an appropriate incentive for the devotion of effort to improvement of productivity.

There is a double reason for requiring the indices used for the purpose of adjusting the caps to be beyond the regulated firm's direct influence, which is why one does not use for the purpose data on the actual input costs incurred by the firm or its actual current rate of productivity growth. The first reason is the obvious one - it is clearly desirable to ensure that no regulated firm be in a position to subvert the price-setting process by an ability to manipulate the indices that serve as the price cap adjustors. However, the second reason, which is just the obverse of the first, is at least equally important. An index which is related to the firm's payoff and which can be influenced by the firm's own decisions is itself likely to affect that firm's decisions. The company will be led to make decisions and to behave in ways which might otherwise be irrational. When it distorts the decisions of the firm in such a way, the regulatory process has sometimes led to serious reductions in economic efficiency. It is indisputably desirable that such efficiency losses be avoided, and that can be accomplished through the use of objective indices beyond the influence of the regulated firm as the basis for the automatic price cap adjustments.

Together, the price cap provisions just described constitute a powerful and effective instrument for protecting consumer interests in telecommunications. In conjunction with the antitrust laws, they can also deal effectively with the legitimate concerns of competitors.

Stand Alone Costs as the Ideal Price Cap Levels: What has been called "stand-alone cost" - the level which if exceeded by actual prices would make entry profitable, in the absence of entry barriers - remains the correct economic standard for setting regulatory ceilings on prices. The reason, as we have explained elsewhere in greater detail, is that competitive markets will never permit prices to remain above stand-alone costs for any considerable period, because stand-alone cost is, by definition, the price level above which competitive entry becomes attractive. That is, the stand alone cost is better described as the entry-inducing price, so that in a truly competitive market no price higher than this could persist because it would attract new firms into the market, entrants who would undercut current prices in order to take the business away. On the other hand, no price below stand-alone cost is inconsistent with competition if demand conditions permit that price to be charged, because no such price can attract the competitive entry that can force the price lower. Thus, if the regulator wishes to offer consumers all the protection against excessive pricing that competition would provide them, but if the regulator at the same time properly abjures any attempt to circumscribe the regulated firm's pricing more severely than effective competition would, it follows that stand-alone cost is the only legitimate and defensible cost-based standard for the setting of rate ceilings, at least in theory.

In practice, however, stand-alone costs may be difficult and time consuming to calculate, particularly if the regulator requires in advance an extensive set of stand-alone cost statistics for all or most of the products of the regulated firm. As a result, it may indeed be the better part of valor to adopt the current rates as a defensible price cap proxy for stand-alone costs, as the FCC has done.(6)

Nevertheless, stand-alone cost in practice has two general roles to play in the determination of a set of rate ceilings that can claim to approximate optimality: . They must serve as a general standard against which any workable procedure for the calculation of a set of price ceilings must be tested to determine whether that procedure satisfies the public interest standard, i.e., whether that procedure is consistent with the competitive guidelines for optimality in regulation. Even where the levels of rate ceilings are not initially determined by calculations of stand-alone costs, the adjustments of rate ceilings over time can be guided by analysis of the way in which stand-alone costs are affected by inflation and improvements in technology and productivity. . In addition, stand-alone cost must be accepted as a legitimate basis for challenging any price, actual or proposed, on grounds that the price is too high. That is, if any affected party can establish that the service in question does not face effective competition and that the price exceeds the pertinent stand-alone cost, that showing should constitute sufficient ground to require downward revision of the rate in question.

Price Caps for New and

Restructured Services

The public interest does not require new services to be subjected to price cap restrictions. Accordingly, the FCC has undertaken to exempt new services from price cap regulation for some initial period. The point is that introduction of a new product is an act of innovation as substantial as the inauguration of a new production technique, because both increase the utility offered to consumers by use of a given quantity of input resources. And just as profit incentives are required to elicit a regular flow of process innovations, they are required also to induce firms to invest in the R&D necessary for the design of valuable novel or modified services. Exclusion of such new services from price caps can offer just the sort of profit reward that can serve as the required incentive for such socially beneficial behavior.

A regulatory rule offering such immunity from price regulation may seem to create an incentive for spurious product modifications and useless product novelties as means to escape regulatory price cap constraints. But such concerns are entirely groundless so long as the firm is not permitted to cease offering older, price capped, substitute products when the new product is introduced (a requirement the FCC has appropriately imposed before it will permit price cap exemption for a new service). The point is if the "new" product is really a valueless variant of an item that was offered before, consumers will find little to choose between the two, and any effort to market the "new" product at a price substantially above that of the old will simply drive away all potential buyers of the allegedly novel item. This scenario is automatic and self-enforcing.

However, after some period, perhaps on the order of three to five years after the introduction of a new or restructured product, it may be appropriate for the Commission to entertain challenges to the pricing of the by-then established products. Even at that point, the Commission should intervene only if it is demonstrated that the service faces no effective competition from offerings of other firms, that demand for the service is not cross-elastic with other services that are subject to price caps, or that the service is being priced above its stand-alone cost. Only in these circumstances should a price cap be considered, and if one is adopted, it should be established at the level of stand-alone cost.

Regulatory Review and Surveillance

Finally, it is appropriate that the Commission commit itself to a review of the working of the price cap system some three years after its inauguration, as the FCC apparently plans to do. The Commission should then obviously take into account evidence concerning the state of competition in the industry and any market changes during the intervening period, the behavior of actual prices under the price cap regime, the performance of the inflation index and any productivity target figure used to adjust the price caps, relative to the actual inflation rates of telecommunications input prices and the actual productivity experience of the industry. The Commission will no doubt want to take all these and other considerations into account before deciding what, if any, modifications in the price cap arrangements are required, or whether competition in the industry is sufficient to warrant the elimination of price cap regulation.

As part of its review, the Commission will probably consider it necessary to examine the level of profits in the industry, adjusting the price caps accordingly if it finds those profits to be either excessive or inadequate. But here it is crucial to emphasize that the promotion of innovation and productivity growth makes it essential that the Commission confine its attentions to the profitability of the industry as a whole and that it eschew any attempt to intervene in the finances of any individual firm. For under a well-run price cap regime, the only way in which a firm can earn profits significantly higher than those typical for the industry, is by extraordinary productivity and cost-saving performance. To penalize an individual firm for achievement on this front is indeed to kill the golden-egg-laying goose. Only if the industry as a whole can be shown to be earning profits above the competitive level is there any ground for the conjecture that the price caps are insufficiently constraining.

During the period between institution of the price caps and the date of the formal review, the Commission will, of course, want to maintain continuing surveillance of developments. However, we urge the Commission to refrain from hasty intervention in the workings of the price caps before they have had ample time to adjust into smooth operation. Moreover, temporary aberrations in market behavior should also normally elicit no regulatory response, for hair-trigger intervention can undermine the automatic self-correcting nature of the proposed process and subject the industry to the heavy hand of old fashioned regulatory control.


The new regulatory regime adopted by the FCC in May of 1988 amounts to no less than a revolution that promises to inject an unprecedented degree of rationality into the rate regulation process. Bureaucratic costs and delays, which to some degree are inevitably present, will be reduced sharply. Competitors' legitimate interests will automatically be protected, because the regulated firm that is prevented by price caps from overcharging anywhere, will not be in a position to afford to undercharge anywhere as a means to drive rivals out, and the price caps will also prevent the firm from benefiting from the exit of rivals. But most of all, the gainers will be the consuming public, whose real rates will systematically be cut below the levels that would otherwise have prevailed, and who also will benefit from the savings in use of the economy's resources entailed in the productivity growth that the new program will elicit. One may want to differ with the FCC on details of its plan, but the change in regulatory orientation that it represents is surely unexceptionable.


1. There is a considerable literature in which economists have shown the logic and virtues of the price cap approach. These include among other items:

Baumol, W. J. "Reasonable Rules for Rate Regulation, Plausible Policies for an Imperfect World." Almarin Phillips and Oliver E. Williamson, eds. Prices: Issues in Theory, Practice and Public Policy. Philadelphia: University of Pennsylvania Press, 1968.

"Productivity Incentive Clauses and Rate Adjustments for Inflation." Public Utilities Fortnightly, Vol. 110, July 22, 1982, pp. 11-18.

J.C.Panzer and R.D.Willig. Contestable Markets and the Theory of Industry Structure. San Diego: Harcourt, Brace, Jovanovich, Revised edition, 1988.

Haring, John R. and Evan R. Kwerel. "Competition Policy in the Post-Equal Access Market." Washington: Federal Communications Commission, Office of Plans and Policy, Working Paper No. 22, February 11, 1987.

Myers, S.C. "The Application of Finance Theory to Public Utility Rate Cases." Bell Journal of Economics, Vol. 3, Spring 1972, pp. 58-97.

Vogelsang, Ingo. Price Cap Regulation of Telecommunications Services. Santa Monica: The RAND Corporation, 1988.

and J. Finsinger. "A Regulatory Adjustment Process for Optimal Pricing by Multiproduct Monopoly Firms." Bell Journal of Economics, Vol. 10, 1979, pp. 157-171.

Williamson, Oliver E. "Administrative Controls and Regulatory Behavior." H.M. Trebbing, ed. Essays on Public Utility Pricing and Regulation. East Lansing: Institute of Public Utilities, Michigan State University, 1971.

2. We have recently demonstrated, using real cost figures, how astonishingly volatile cost numbers are in response to a change in allocation criterion. See William J. Baumol, Michael F. Koehn and Robert D. Willig. "How Arbitrary is `Arbitrary'? - or, Toward the Deserved Demise of Full Cost Allocation." Public Utilities Fortnightly, September 3, 1987, pp. 16-21. Since the regulatory price calculations must be arbitrary, they will not protect the interests of consumers as they should, because some of the regulatory prices that emerge are likely to be too low and others too high relative to the competitive price levels. Moreover, the mechanism will tend to distort the growth of competition, providing havens of immunity to some inefficient rivals while inappropriately subjecting others to improper risks. Regulated prices that are excessive will constitute cream-skimming opportunities for rivals, efficient and inefficient alike. On the other hand, regulated prices that are below their true competitive levels will impede or even preclude the survival or the entry of genuinely efficient rivals.

3. See Gerald R. Faulhaber. "The FCC's Path to Deregulation: Turnpike or Quagmire?" Public Utilities Fortnightly, September 3, 1987, pp. 22-26.

4. Economic analysis shows that when the weights used to determine the average rate are based on the previous period's quantities, the flexibility permitted by an aggregative cap will work to promote the total net benefit accruing to consumers. On this, see Vogelsang [1988].

5. Changes in major cost components such as access charges, tax law requirements and Separations Manual procedures (i.e., changes that are not under the regulated firm's control) should immediately be reflected in the price caps, adjusting them either upward or downward as appropriate.

6. For the conclusion that price caps set at current tariff rates will be at least no higher than stand-alone costs, one must merely accept the premise that competition is substantially effective in at least some significant areas of interexchange telecommunications. Given this fact, the combination of carrier-initiated rates and competition is likely to have resulted in tariff rates in such areas which approximate or are below stand-alone costs. Moreover, the Commission's national rate averaging policy, requiring equal rates for equal distances throughout the country, together with reselling rules which permit "wholesale" purchase of telephone services at the low rates offered to big customers, and resale of those services at "bargain" rates to small consumers, make it probable that the effects of competition in these most competitive markets will be transmitted to any less competitive market segments. This, in turn, makes it likely that those rates will also approximate or fall below stand-alone costs.
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Author:Baumol, William J.; Willig, Robert D.
Publication:Review of Business
Date:Mar 22, 1989
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