27 October 2005

Tacit collusion among incumbent carriers?

In class recently I wondered out loud why competition had not emerged among the incumbent wireline carriers. Now this article appears, citing a study by a respected economist (a challenge to you is to find the ex parte referred to in the article), which outlines the incentives for this behavior.

If this is true, what kinds of responses (if any) should their be?

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1 comment:

KuangChiu Huang said...

I think it is difficult to prevent tacit collision because there is no material evidence (contract, memo, telephone call) to indict the collusion behavior of these silence carriers. I also assume tacit collusion could be one of driving forces for merger and acquisition, which changes market structure and makes such collusion feasible and stable. In this scenario, market is malfunctioned, so government involvement could be inevitable to solve the problem. I don’t mean government can compel private films to compete each other (Verizon versus SBC/AT&T), but I wish some solutions (e.g., common conduit) can remove barriers to entry and increase competition in local telecommunications market.