Unnatural monopolies in local telephone

Article Abstract:

The divestiture of the American Telephone and Telegraph (AT&T) was a result of antitrust violation claims. A justification for this would depend on whether the monopoly was a natural one. Local exchange carriers (LECs) were subjected to global subadditivity tests and results showed that their cost functions were superadditive. This means that at the local level, AT&T was spending more as a monopoly than if the LECs were independent, competitive firms, which makes it an unnatural monopoly. The projected loss of efficiency due to divestiture would be outweighed by the economic benefits.

Electronic computers, Telephone communications, exc. radio, Research, Mergers, acquisitions and divestments, Telecommunications services industry, Telecommunications industry, Cost benefit analysis, American Telephone and Telegraph Co.

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Tying as a response to demand uncertainty

Article Abstract:

The requirements tying of a competitively supplied good to a monopolized good is analyzed using a model that allows a manufacturer to monitor and prohibit sales from buyers who have paid a fixed fee to those who have not. The model implies that two-part pricing is feasible. A firm, with a heterogenous and privately informed consumers, can generate profit by tying two goods even when the demands are price independent and the demands are stochastically dependent.

Pricing Policy, Marketing Management NEC, Models, Evaluation, Pricing, Marketing management, Stochastic processes, Tying agreements, Tying arrangements

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The value of information about product quality

Article Abstract:

Information on product quality is always more valuable to a monopolist than to a consumer. A firm's realization of a poor quality may force it to stop production which would hurt the consumer. Also, a monopolist may increase its prices if realization of a product quality is good but may not lower it for bad realization. Analysis shows that when demand and cost function are linear consumers favor more information.

Product quality, Consumer education

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