Glenn A. Woroch

Going Mobile: Substitutability Between Fixed and Mobile Access

We empirically estimate the substitutability of fixed and mobile services for telecommunications access using a large, U.S. household survey conducted over the period 2000-2001. Estimated cross-price elasticities confirm that second fixed line and mobile services are substitutes for one another. The extent of fixed-mobile substitution has important implications for policy toward fixed network unbundling, fixed-mobile vertical separation, and universal service.

The demographics of the do-not-call list [security of data]

Data from do-not-call registries and other sources show discernible patterns in the demographics of consumers who signed up for do-not-call lists. Such patterns might also be useful in analyzing the prospects for a do-not-spam registry

The Effect of Prices on Fixed and Mobile Telephone Penetration: Using Price Subsidies as Natural Experiments

A natural experiment, unintentionally conducted by the price subsidy program Lifeline Assistance, underpins our innovative strategy to estimate consumer demand for communications services. Using a national household panel containing demographic and billing information, we estimate own and cross-elasticities of demand for fixed and mobile services and find moderate substitution between the two. We control for the role of income effects by showing the subsidy has little effect on consumption of similar products and services. To account for potential bias due to endogeneity of program participation, a difference-in-differences analysis of re-sampled households results in estimates similar to the cross-sectional analysis. An asymmetry in the response to Lifeline participation arose depending on whether a household added or dropped Lifeline between samplings. We use the estimated demand parameters to simulate the impact of making the Lifeline program universal, or eliminating it altogether. In either case we find the net impact on combined fixed and mobile penetration is small.

Open Access Rules and Equilibrium Broadband Deployment

Investment in advanced communications infrastructure promises such tantalizing payoffs as accelerated economic growth and enhanced national competitiveness. Relatively little disagreement arises in policy debates that such benefits are possible—usually only their size and distribution across the population are at issue. Bitter disputes, however, have occurred over which path will lead the communications sector to deploy these technologies most expeditiously and equitably.

Input-Quality Sabotage and the Welfare Consequences of Parity Rules

We analyze the welfare effects of “parity” rules that force a vertically-integrated input monopolist (VIM) to treat downstream affiliates and competitors alike in terms of price and quality. We find that input-quality parity can lower social welfare when input pricing is unregulated. In contrast, the VIM may either find it profitable to engage in “rival sabotage” or even “self sabotage” which can be welfare maximizing. When parity input prices are set at marginal cost, the input monopolist has an incentive to degrade the input sold to its downstream rival, and possibly to excessively upgrade the quality supplied to its affiliate. Thus, the desirability of input-quality parity is highly dependent on the nature of the input pricing policy. We additionally find that input quality parity not only creates an incentive for the VIM to set a higher input price to its retail rivals, but to price above marginal cost to its affiliate as well.

Promoting Capital Improvements by Public Utilities: A Supergame Approach

A public utility undertakes capital improvements only if it expects to earn revenues that cover necessary investments and provide a competitive return. Typically, outlays occur within a short span of time while the returns are spread over a much longer period. This applies to expenditures for cost-reducing investments, capacity expansion, or product enhancements. It is especially true of utilities that adopt new technologies such as the latest advances in telecommunications networks.

Exclusionary Behavior in the Market for Operating System Software: The Case of Microsoft

This chapter examines Microsoft’s licensing practices for its MS-DOS and Microsoft Windows operating system software. Our main focus is on Microsoft’s use of CPU (central processing unit, or per-processor) licenses under which an original equipment manufacturer (OEM) of personal computers pays a royalty for each machine it ships rather than for each unit of an operating system it installs. We also examine license provisions that require purchase of a minimum number of rights to install an operating system, Microsoft’s tying of both technical support information and Windows to MS-DOS, and Microsoft’s attempts to induce technical incompatibility between MS-DOS and its main competitor, DR-DOS.

Regulatory risk, investment, and welfare

This paper assesses the allocative and distributional effects of uncertain regulatory constraints on rate of return, on price, and on competitive entry. A profit-maximizing firm responds to rate-of-return risk by substituting variable factors for sunk investment, but expands capacity when faced with either price risk or entry risk. Investors gain from the elimination of regulatory risk, a result that parallels Peltzmans contention that regulators could raise investor wealth by reducing risk. Consumers benefit from price and entry risk, but only under severe restrictions on tastes and technology. An inherent feature of government intervention, regulatory risk should be taken into account when comparing alternative policies for regulating (or deregulating) an industry.

Second-best pricing with upstream distortions

Abstract Optimal pricing by a public firm facing an upstream monopolist and monopsonist is compared with the first-best rule, itself a modified Ramsey formula. Deviations from marginal cost are larger and occur even in the absence of a budget constraint.

Social learning about environmental innovations : experimental analysis of adoption timing

Laboratory experiments were conducted to investigate how private and public information affect the selection of an innovation and the timing of adoption. The results shed light on the behavioral anomaly called the “energy-efficiency gap” in which consumers and firms delay adoption of cost-effective energy and environmental innovations. The subjects chose between competing innovations with freedom to select the timing of their adoption, relying on private signals and possibly observation of their peers. When deciding whether to make an irreversible choice between safe and risky technologies, roughly half the subjects delayed adoption beyond the time indicated by equilibrium behavior -- confirming the behavioral anomaly found for environmental innovations. When they did adopt, the subjects gave proportionately more weight to their private signals than to the actions of their peers, implying they do not ‘herd’ on the latter. Nevertheless, when the subjects observed their peers’ decisions, they did accelerate the timing of their adoption despite not necessarily imitating their peers. This result occurred even when the payoffs were statistically independent, as if observing prior adoptions exerted ‘peer pressure’ on the subjects to act. The experimental results suggest that rapid dissemination of information about peer actions can speed up the diffusion of environmental innovations and improve selection among competing technologies.