Econ 461 Quiz2 - When it comes to network utilities there...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
When it comes to network utilities there are many neoclassical economic concerns. Natural monopolies are inefficient for the welfare of society and thus regulation is necessary to bolster competition. Some of the ways in which the number of firms in the market and prices can be controlled show the potential negative-effects of differing economic strategies. One possible concern is when access prices are set based on use. It is difficult to implement due to the difficulty in calculating correct prices in such a rapidly evolving industry like telecommunications. There is an increased risk of regulatory capture when there are complications setting prices. With an increase in regulatory discretion comes an increase in effort on the part of the industry to influencing the outcome. Another way to regulate the industry would be by using a global price cap. This would allow monopolists to set their own prices while under a price cap. In order for this to properly work intermediate goods must be treated as final goods when computing the cap, and the weight used when calculating the cap must be proportional to the expected quantities of the relative good. Unfortunately, this does not happen in standard practice since
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/11/2010 for the course ECON 461 taught by Professor Shannon during the Spring '10 term at University of Maryland Baltimore.

Page1 / 2

Econ 461 Quiz2 - When it comes to network utilities there...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online