Collusive Long-Run Investments Under Transmission Price-Caps

In the short run, constraints in the electricity transmission system may give market power to generators. This paper examines whether the constraints themselves are a long-run equilibrium outcome in a competitive environment. We show that independent transmission companies and generators can tacitly collude to raise prices to consumers and divide the resulting profits. We also show that price cap regulation does not prevent this behavior and may in fact contribute to it. The mechanism for collusion is that generators locate their plants so that a capacity-constrained transmission line lies between them and their consumer market. We show that this constraint-based collusion can be sustained in a static game without any punishment strategies.     

Excessive(?) entry of national telecom networks, 1990–2001

This paper documents entry and capacity expansion in US long-distance fiber–optic networks before and during the “telecom boom.” It disentangles the many swaps and leases between networks in order to measure owned route miles versus route miles shared with other carriers. Entry is still extensive, but more moderate when these shared miles are not counted. It concludes that entry was excessive primarily with regard to swaps and leases, but less so with regard to the physical building of the networks.     

Local News Online: Aggregators,Geo-Targeting and the Market for Local News*

We examine how placement of geo-targeted local news links on Google News affected local news consumption. Using a sample of news visits by 36,876 U.S. households before and after a Google News design change, we find that aggregation increased the level and share of local news consumed online. Magnitudes are modest: consumption of local news among heavy Google News users rose by 25% after the redesign, but from a low base. Geo-targeting increased weekly consumption variety and reduced concentration among local outlets but did not raise overall consumption variety, suggesting that aggregators play a limited role in product discovery.     

Broadband Internet: net neutrality versus open access

“Network neutrality” and “open access” are two policies designed to preserve openness on the Internet. Open access mandates openness of conduits (e.g. television cable and DSL) to intermediaries (e.g. America Online), while network neutrality mandates openness to advanced content (streaming video, interactive e-commerce, etc.). We develop a systems model with free entry and competition in all three industry segments (conduits, intermediaries, and content) and examine the effects of the two types of regulation. We find that open access does not necessarily result in more openness of content and is not a substitute for network neutrality.

The Market Structure of Broadband Telecommunications

The recent growth of the Internet is creating markets for broadband telecommunications networks. In the past, virtually all such 'infrastructure' networks have been subject to government regulation. Two reasons advanced for this market intervention are (i) such networks constitute a natural monopoly, and (ii) to achieve 'universal service', in which all citizens have access to services. In this paper, we develop a model and estimate it using engineering data which tests if these two hypotheses are likely to obtain for broadband networks. We find that oligopolistic competition is likely to emerge for demand levels approaching that of today's cable television.     

Japanese productivity: adapting to changing comparative advantage in the face of lifetime employment commitments

This article examines one of the possible sources of Japan's productivity growth--industrial policy. The policy actively encourages the transfer of resources, including labor, out of what are considered to be declining industries and sectors, and into industries and sectors considered to be expanding. At the same time, job security is guaranteed for a significant proportion of the labor force, and the article seeks to explain how Japanese "lifetime employment" can be maintained in the presence of the country's industrial policy.