The Effect of Technological Change and Regulation on the Evolution of the New Zealand Telecommunications Market

<p><b>The absence of industry specific regulation of access to the incumbent'stelecommunications network in New Zealand for an extended period, between1989 and 2001, is unique compared with other countries with developedtelecommunications markets that were opened to competitive entry. This featureof the New Zealand market provides an opportunity to compare the conduct andperformance of antitrust regulation with industry specific regulation introducedin 2001.</b></p> <p>Of particular interest is the place of the concepts of natural monopoly andperfect competition in the regulation of a dynamic market. This thesisestablishes the characteristics that contribute to dynamic supply and demandconditions in the telecommunications market including network effects,discontinuity in demand due to participation, ongoing technological progress ofhardware, sunk costs of software development, and the irreversible investmentof augmenting capacity to meet expected growth in demand. The economicliterature on conjectural variations indicates that under such conditions theconcepts of natural monopoly and perfect competition do not explaincompetitive conduct due to an unstable market equilibrium. The implication isthat forming a reasonable view of competitive conduct is limited to the presentperiod of time.</p> <p>It is shown that decisions made under antitrust regulation are limited to theparticular context of disputed competitive conduct, and these decisions do notspeculate on future competitive conduct. In contrast, industry specific regulationhas formed a sequence of views of competitive conduct, looking forward, that isbased on concepts of natural monopoly and perfect competition. It is observedthat with time, these views of competitive conduct have evolved with thechanging market conditions. If regulatory actions evolve with a changing view ofcompetitive conduct they risk reducing dynamic efficiency.</p>

The Effect of Technological Change and Regulation on the Evolution of the New Zealand Telecommunications Market

<p><b>The absence of industry specific regulation of access to the incumbent'stelecommunications network in New Zealand for an extended period, between1989 and 2001, is unique compared with other countries with developedtelecommunications markets that were opened to competitive entry. This featureof the New Zealand market provides an opportunity to compare the conduct andperformance of antitrust regulation with industry specific regulation introducedin 2001.</b></p> <p>Of particular interest is the place of the concepts of natural monopoly andperfect competition in the regulation of a dynamic market. This thesisestablishes the characteristics that contribute to dynamic supply and demandconditions in the telecommunications market including network effects,discontinuity in demand due to participation, ongoing technological progress ofhardware, sunk costs of software development, and the irreversible investmentof augmenting capacity to meet expected growth in demand. The economicliterature on conjectural variations indicates that under such conditions theconcepts of natural monopoly and perfect competition do not explaincompetitive conduct due to an unstable market equilibrium. The implication isthat forming a reasonable view of competitive conduct is limited to the presentperiod of time.</p> <p>It is shown that decisions made under antitrust regulation are limited to theparticular context of disputed competitive conduct, and these decisions do notspeculate on future competitive conduct. In contrast, industry specific regulationhas formed a sequence of views of competitive conduct, looking forward, that isbased on concepts of natural monopoly and perfect competition. It is observedthat with time, these views of competitive conduct have evolved with thechanging market conditions. If regulatory actions evolve with a changing view ofcompetitive conduct they risk reducing dynamic efficiency.</p>

Consistent Conjectural Variations Equilibrium in the Semi-Mixed Oligopoly

We study a variant of the mixed oligopoly model with conjectural variations equilibrium, in which one of the producers maximizes not his net profit but the convex combination of the latter with the domestic social surplus. The coefficient of this convex combination is named socialization level. The producers’ conjectures concern the price variations depending upon their production output variations. In this work, we extend the models studied before, considering the case of the producers’ cost functions being convex but not necessarily quadratic. The notion of exterior and interior equilibrium is introduced (similarly to previous works), developing a consistency criterion for the conjectures. Existence and uniqueness theorems are formulated and proven. Results concerning the comparison between conjectural variations, perfect competition, and Cournot equilibriums are provided. Based on these results, we formulate an optimality criterion for the election of the socialization level. The existence of the optimal socialization level is proven under the condition that the public company cannot be too weak as compared to the private firms.

The role of nonzero conjectural variation in pollution abatement and output in the design of emission taxes

The presence of nonzero conjectural variations in pollution abatement and output make emission taxes less effective with respect to reducing emissions. This has implications for the characterization of the optimal emission tax, particularly in an international context where there are large asymmetries in pollution intensities. A higher degree of collusion in output between polluting firms results in higher emissions taxes in the non-cooperative equilibrium. In contrast, a higher degree of collusion in abatement between polluting firms results in lower emissions taxes in the non-cooperative equilibrium. These results rely on the presence of nonzero conjectural variations and large asymmetries in pollution intensities across countries. The analysis is relevant to the design of international environmental policy, including cases where countries face increasing global competition and damages from rising global emissions.