Service Quality Effects of Incentive Regulation on Access Service in Telecommunications in the United States

Incentive regulation in the form of price caps was adopted for interstate access service in 1991 as a way to provide local exchange carriers with an incentive to improve their productive efficiency. An issue that has arisen with the adoption of price cap regulation is whether deterioration in service quality for interstate access service has been an unintended consequence. The analysis in this paper uses several different measures of service quality, including the average installation interval, the percent of commitments met, total trouble reports, and the average repair interval for both switched access service and special access service, to investigate empirically whether there has been a decline in service quality between 1991 and 2000. The results are conclusive. Overall service quality has fallen. To rectify the situation, a proposal is offered to adjust the price cap index to penalize LECs who fail to provide an acceptable level of aggregate service quality.     

The UK Domestic Gas Electricity (Tariff Cap) Act: Re‐regulating the Retail Energy Market

The UK retail energy market has witnessed multiple regulatory interventions since its liberalisation almost two decades ago. Such interventions reached their peak with the enactment of the UK Domestic Gas Electricity (Tariff Cap) Act in July 2018. The Act puts in place a requirement on the independent regulator, the Office of Gas and Electricity Markets (Ofgem), to set an absolute price cap on poor value tariffs. As such, it signals a repudiation of the overarching paradigm of consumer empowerment that has informed regulatory remedies to date. Rather than advocating for a different paradigm, this article highlights the difficulties inherent in reconciling price caps – both practically and conceptually – with the competitive process and consumer empowerment. It also discussses other instruments, not necessarily exhausted in retail price regulation, that can render affordable energy prices, without sacrificing consumer empowerment.     

Impacts of realized volatility of oil price over foreign trade related activities in Turkey

Since 1973 oil crises, especially, small open economies have considered sudden and highly volatile movements in currencies and current account deficits. Oil prices have been breaking new historical price records since second quarter of 2014, especially from last quarter of 2015 to first quarter of 2016, which have gradually put pressure on political, geographical, and currencies risks in the Middle East and Eastern European countries. Similarly, because Turkish economy has been experienced serious current account deficit problems especially since 2002, the effect of decline in oil prices and increased volatility has been worth of investigating. For 2003M1–2015M7 period, export–import ratio, real exchange rate index, realized volatility in oil prices calculated based on monthly OPEC basket price, industrial production index, and consumer price index were collected to analyze these effects and causality relationship among these variables. Test results of unit root test with and without structural break, ARDL bound test and co-integration test were sorted out among variables. Initial result is that price volatility increases and total import decreases more sharply than total export after the decline in oil prices; thus, export–import ratio increases. Another is that there is a negative relationship between real exchange rate index and export–import ratio for real economy because of low oil substituents. As expected, inflation has an adverse effect on foreign trade ratio. Consequently, because of lower pressure of energy-induced inflation, economy policy makers will have some ability to change their priorities from inflation issue to other structural problems.     

Oil price shocks and stock market returns of the GCC countries: empirical evidence from quantile regression analysis

This paper examines the effects of oil price shocks on the stock market returns of the Gulf Cooperation Council countries. The empirical method used is quantile regression analysis. In addition, we allow for structural breaks and asymmetry by differentiating between positive and negative oil price changes. Unlike OLS analysis, quantile regression allows the coefficient estimates to vary throughout the distribution of the dependent variable, which provides a complete picture of the relationship between the explanatory variables and the dependent variable. Our results suggest that the coefficient estimates have not been constant throughout the distribution of stock returns; that oil price shocks have asymmetrical effects on stock returns; and that the effects of oil price shocks on stock market returns are affected by stock market conditions. Overall, the results suggest that rising oil prices increase stock returns only when stock markets are bullish (high quantiles) and normal (medium quantiles), and that falling oil prices lower stock returns only when stock markets are bearish (low quantiles) and normal (medium quantiles). This suggests that oil and stock markets are more likely to boom together or crash together.     

POTENTIAL EFFECTS OF PROPOSED PRICE GOUGING LEGISLATION ON THE COST AND SEVERITY OF GASOLINE SUPPLY INTERRUPTIONS

The rise in gasoline prices that followed the devastation causedby Hurricanes Rita and Katrina has led to proposals for federal"price gouging" legislation. This paper analyzes the potentialeconomic costs of such proposals in light of the experiencegained from prior episodes of gasoline supply interruptionsand efforts to impose price controls. Studies of previous spikesin the price of gasoline, including those after Katrina andRita, have consistently found that price increases were dueto the normal operation of supply and demand and not price manipulation.Studies of gasoline price controls find that neither consumersnor the economy benefit, because the apparent monetary savingsto consumers are transformed into costs of waiting or otherforms nonmarket rationing that exceed the monetary savings.Price controls also make shortages worse by reducing the incentiveto provide additional supplies. We apply these lessons to estimatethe additional economic cost that would have been incurred hadprice controls like current legislation been in effect afterthe hurricanes, and conclude that economic damages would havebeen increased by $1.5–2.9 billion during the two-monthperiod of price increases.     

COMMENTS ON NETWORK NEUTRALITY

The term "price discrimination" has been used to vilify itspractitioners since the term's inception in economics. Pricediscrimination is considered evil because discrimination isconsidered, in most contexts, as evil. If instead we describedthis common phenomenon as price distinction instead of pricediscrimination, the general field of thought on the matter would,most likely, be extremely different. If a producer engages in"distinguishing" prices instead of discriminating prices, theworld would be a more rational place, because economic discriminationis so often socially beneficial. The network neutrality argumentis no different. The debate essentially addresses the issueof limiting a network provider's ability to engage in pricedistinction before the fact. The model of a toll road presents an acceptable framework foranalyzing network neutrality. It has been used frequently toanalogize the Internet     

Savings and retail price reform in a queue-rationed economy

The paper addresses the effect on consumer saving behavior of queue rationing and of price reform in a Soviet-type economy in a lifecycle framework with overlapping generations. It is shown that consumers save less for retirement in a queue-rationed exchange economy with black markets than they would in a free-market system with the same endowments. The expectation of price reform is thus likely to cause an increase in consumer savings. In addition, an analysis is given of the effect of the increase in controlled prices on the black market prices and on the prices of unrationed goods.     

A multilevel analysis of the effect of cocaine price on cocaine use among arrestees

Using data drawn from the Arrestee Drug Abuse Monitoring Program, from the Drug Enforcement Administration's System to Retrieve Information from Drug Evidence, and from the 1990 Census, this study examined whether an arrestee's probability of testing positive for cocaine use varied across aggregate levels of cocaine price. Results from a Hierarchical Generalized Linear Modeling analysis revealed that in cities where the price of cocaine was relatively high, arrestees had a lower probability of testing positive for cocaine use. Specifically, a 10 percent increase in the price of cocaine was associated with a 3 percent decrease in the odds that an arrestee would test positive for cocaine use. Findings also showed that individuals arrested for income-generating crimes did not have a higher probability of testing positive for cocaine when the price of cocaine was relatively high. Thus, it appeared that higher cocaine prices were not inducing users to amplify their criminal activity in order to finance a more costly drug addiction. Finally, results failed to furnish support for the hypothesis that individuals substituted opiates or marijuana when cocaine became more expensive.     

The Dutch Disease: evidences from Russia

The present study examines whether the Russian economy exhibits the symptoms of the Dutch Disease over the transition period begun in the early 1990s. Five warning signs have been detected, namely, a real exchange rate appreciation (1); a flourishing economic situation pushed by higher oil prices (2); a relative de-industrialisation (3); an export reduction in the non-booming-sector (4) and a real wage growth (5). The first three symptoms are estimated simultaneously in a VECM dimension. The results suggest the existence of three long-run cointegrating vectors, thus confirming the presence of the first three symptoms. Specifically, a 10% oil price shock leads to a real appreciation by 4%, a rise in GDP by 3% and a decline in domestic manufacturing production vis-à-vis service production by another 3%. Finally, a number of manufacturing exports have been crowded out and real wages have recorded important increases. To a certain extent, this corroborates the presence of symptom 4 and 5. The paper concludes that the risk of the Dutch Disease exists, and two preventive thrusts of action could be undertaken to reduce its threat: namely to diversify the economy and to hold back the appreciation of the exchange rate through targeted fiscal and monetary policies. These instruments would render Russia less vulnerable to exogenous shocks.     

Advertising and the Price and Quality of Legal Services: The Case for Legal Clinics

Because the holding in Bates v. State Bar of Arizona is narrow and because some lawyers remain opposed to advertising, the dispute over lawyer advertising continues. Many who favor restricting advertising contend that it will not benefit consumers. They argue that prices must either rise to cover the cost of advertising or, if prices do fall, that quality must also drop.
This article addresses itself to both charges. The first section is theoretical, demonstrating how advertising could lower the costs of producing legal services. Advertising increases the volume of services a lawyer can expect to sell. Greater volume, in turn, allows greater specialization in production, more effective use of systems management, and the substitution of paralegals and capital for lawyer inputs. The authors argue that each of these changes will lower costs, thereby lowering prices without necessarily reducing quality. The second section is empirical, comparing the prices and particularly the quality of services produced by a heavy advertiser, the Legal Clinic of Jacoby & Meyers, and the traditional firms in the Los Angeles market with which the clinic competes. Quality is defined both subjectively and objectively, and original data are presented indicating that the quality of service that the clinic supplies is at least equivalent, and on some measures better, than the quality of service that traditional firms provide.     

Are bar associations anticompetitive? An empirical analysis of recommended prices for legal services in Spain

The European Commission Report on Competition in Professional Services found that recommended prices by professional bodies have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. Professional associations argue, first, that a fee schedule may help their members to properly calculate the cost of services avoiding excessive charges and reducing consumers’ searching costs and, second, that recommended prices are very useful for cost appraisal if a litigant is condemned to pay the legal expenses of the opposing party. Thus, recommended fee schedules could be justified to some extent if they represented the cost of providing the services. We test this hypothesis using cross-section data on a subset of recommended prices by 83 Spanish bar associations and cost data on their territorial jurisdictions. Our empirical results indicate that prices recommended by bar associations are unrelated to the cost of legal services. Therefore, we conclude that fee schedules are not playing the role of providing useful cost information to practitioners and therefore this efficiency justification is weak.     

WHEN CAN REGULATION DEFER TO COMPETITION FOR CONSTRAINING MARKET POWER?: COMPLEMENTS AND CRITICAL ELASTICITIES

When can regulation defer to competition for imposing pricediscipline? We show that high price–cost margins, reflectingscale/scope economies, in combination with demand complementaritiesserve to constrain the market power of the (de)regulated firm.Because price increases that produce even small reductions indemand can generate significant losses in contribution to joint/commoncosts, relatively modest amounts of competition may be sufficientfor deregulation. To assist policymakers in their deliberations,a comparison of firm-specific price elasticities and criticalprice elasticities can be used to determine whether the (de)regulatedfirm would have incentives to raise prices post-deregulation.     

Specification of dynamic wage-price relations in Poland (1980–1991)

This paper focuses on the analysis of wage-price relationships during the period 1980–1991 in Poland. The dynamics of wage and price series under radical structural changes are examined, as well as the impact of earlier sharp price increases. The process of wages-to-prices adjustment both in the long- and short-term is analysed. The hypothesis that the introduction of economic reform (at the beginning of 1990) would result in a tendency towards the stabilization of real wages is investigated. This is done through integration and cointegration analysis of wage and price series with special attention being paid to the problems arising from theI(2) character of the variables investigated. The concept of polynomial cointegration is applied to formulate error correction terms for the short-run model of wages. The computations have been made using quarterly data. The results reflect an inhomogeneity of the period investigated, especially the effects of the introduction of economic reform at the beginning of 1990. The nonstationarity of real wages is confirmed, but not their tendency towards stabilization.     

Polish Stabilization: What can we learn from the I(2) Cointegration Analysis?

This paper investigates an array of nominal systems for the Polish economy, of domestic price level, import prices, exchange rates, money stock, nominal wages, and real output, and conducts I(1) and I(2) cointegration analyses. Post-stabilization monthly data are used, 1991:5-1999:12. A test for the presence of a price-wage spiral is performed, and the stabilization package is compared to its realization. The long-run homogeneity hypothesis, the impact of monetary and incomes policies, and of external sector variables on long and medium run price development are studied. It is found that in Poland, contrary to some earlier studies, the external sector is not important for the long run price development. On the contrary, very strong evidence is found of the cost-push inflation.     

Health plan selection in the Federal Employees Health Benefits Program

A survey of over 8,500 employees of the U.S. Department of Health and Human Services (DHHS) during the May 1982 open season, supplemented by enrollment data for all DHHS employees enrolled in the Federal Employees Health Benefits Program (FEHBP), was used to study insurance plan selection when multiple fee-for-service options as well as HMOs are available. There is evidence of biased selection of health risks in the FEHBP, yet historically the program has exhibited considerable stability. The stability may be attributable partly to control over entry and over changes in benefits and premiums and partly to inertia on the part of enrollees. In spite of large changes in relative premiums and benefits, only 21 percent of all enrollees in the DHHS switched plans during the May 1982 open season. Those employees who did switch plans astutely identified bargains; on average they lowered their annual contribution to premium by almost 40 percent while maintaining the level of benefits. Insurance plans offering relatively generous coverage of a particular service attract a disproportionately high share of enrollees who expect substantial use of that service. The extent of adverse or beneficial selection into HMOs depends on the price and the comprehensiveness of benefits of each available fee-for-service option.     

“入世”对我国价格和价格宏观调控的影响及其对策

加入WTO以后，我国的关税将大幅度降低，非关税贸易保护措施削弱，贸易自由化程度提高，国内市场的各类商品将进一步放开，国内外市场的商品将进行公开的、无扭曲的公平竞争，这就为我国的国内市场价格与国际市场价格的对接，为价格的宏观调控的改革提供了前所未有的机遇。“入世”后，国际市场价格对国内市场价格的冲击主要集中在国内的第三产业价格及收费和第一产业的农产品价格。面对“入世”的新情况，为了维护我国的产业安全，我们必须加大市场价格体系的改革力度，形成新的价格体系和价格管理制度。     

Government health policy and hospital labor costs: the effects of wage and price controls on hospital wage rates and employment

This study examines the rapid growth of hospital wage rates and employment levels over the past decade, with particular attention to the period 1971-73, when wage and price controls were in effect throughout the economy. The analysis shows that the hospital regulations under the Economic Stabilization Program reduced real hospital wages below what they would have been in the absence of controls; a similar but smaller effect of the controls on hospital employment levels is also shown. This suggests that if the current HEW proposal for hospital cost containment is enacted, its impact would be a significant decrease in the rate of growth of hospital wages and employment.     

Luxury goods,vertical restraints and internet sales

We propose a model describing consumer demand for a luxury good, in which the perceived quality of the good is related to its scarcity. We use this model to analyze the optimal production and price setting decisions of a luxury good manufacturer and contrast them with the decisions that would be made by a social planner. We show that irrespective of the way social welfare is defined, a monopoly producer of the luxury good may select socially optimal prices and quantity. Thus the incentives of the monopolist and the social planner may to some extent be aligned. We also analyze whether the producer and social planner would be willing to sell the luxury good over the internet if this allowed to increase the number of potential customers for the product. We show that under reasonable assumptions the monopoly producer would not oppose the introduction of internet sales, whilst the social planner may do so, depending on the specification of the model’s parameters. This result is important in the light of the recent revision by the European Commission of its Guidelines on Vertical Restrains (2010).     

THE COMPETITIVE EFFECTS OF A CABLE TELEVISION OPERATOR'S REFUSAL TO CARRY DSL ADVERTISING

Many cable television operators routinely refuse to run localDSL advertising on their cable systems. Given that such conductreduces the advertising profits of cable companies, a plausiblepurpose for such discriminatory refusals to deal is to limittheir cable customers' information about competitive alternativesto their cable modem services. By banning local DSL advertisementsplaced on cable television, a cable television operator foreclosesequally efficient rivals (DSL providers) in the broadband Internetaccess market from the most efficient form of advertising abroadband product (television advertising), as I prove here,and thereby impairs rivals' efficiency. To the extent that DSLproviders cannot compete as effectively as they would in theabsence of the ban, the ban allows cable television operatorsto raise the price of cable modem service and thereby reduceconsumer welfare. Using a traditional antitrust analysis, Ipresent evidence that local television advertising can be aseparate product market (when it comes to marketing DSL), andthat cable television providers have market power in that advertisingmarket. I also present evidence that local television advertisingon cable networks is the most efficient form of advertisingfor DSL providers. The potential anticompetitive effect of cable'sban on DSL advertising is to relegate DSL advertising to lessefficient marketing channels, thereby allowing cable operatorsto charge higher prices for cable modem service. Such conductthus raises obvious antitrust issues.