An empirical analysis of incentive regulation and the allocation of inputs in the US telecommunications industry |
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Authors: | Nongluk Buranabunyut James Peoples |
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Institution: | 1. Economics Business Program, Department of Management Science, University of Rajabhat Udonthani, Udonthani, Thailand 2. Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI, 53211, USA
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Abstract: | A translog cost function is estimated to examine whether carriers use an efficient combination of inputs in the telecommunications
industry. Special attention is given to the role of rate regulation reform in an increasingly competitive business environment.
Findings suggest that telecommunications carriers facing price-cap regulation do use an efficient mix of labor and capital.
In contrast, the condition for cost minimizing use of inputs is not met for telecommunications carriers facing rate-of-return.
The superior factor input use allocation by carriers facing price-cap regulation compared to carriers facing rate-of-return
regulation is interpreted as suggesting that incentive regulation plays an important role in promoting efficient use of inputs
even in a competitive business environment. |
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