John S. Ying

Unnatural Monopolies in Local Telephone

We attempt to overcome the serious data problems of past telecommunications cost studies by focusing on local exchange carriers (LECs). With enough degrees of freedom to yield precise estimates, our global subadditivity tests show that the cost function is definitely not subadditive. The results suggest that the benefits to breaking up the monopoly outputs of existing LECs substantially outweigh the potential losses in efficiency. They also support permitting entry and increasing competition in local exchange markets. Furthermore, given the competitive nature of long distance service, it is doubtful that the predivestiture Bell System was a natural monopoly.

Hospital Costs and Excess Bed Capacity: A Statistical Analysis

The present paper develops and estimates a cost model for U.S. hospitals which enables us to analyze the cost of excess bed capacity. A new estimate is worth making for at least two reasons. First, recent changes in the economic environment in which hospitals operate has caused their utilization rates in the U.S. to fall sharply over the past decade, making previous estimates inaccurate. Second, the present paper employs econometric techniques of cost estimation not previously applied to this problem, with estimation based on all U.S. short-term community hospitals from 1979 through 1989. Our results, based on conservative estimates of the average optimal occupancy rate, indicate an annual cost of excess bed capacity (in current dollars) of

Measuring the benefits of a large public investment: The case of the U.S. Federal-aid highway system

13.2 billion in 1989,

The Inefficiency of Regulating a Competitive Industry: Productivity Gains in Trucking Following Reform

18.4 billion in 1991, and over

PRICING IN A DEREGULATED ENVIRONMENT: THE MOTOR CARRIER EXPERIENCE

20 billion in 1993.

On Measuring Competitive Viability and Monopoly Power in Cable: An Empirical Cost Approach

Abstract This paper presents an analysis of an important component of the benefits of Federal-aid highway infrastructure investments in the United States. Specifically, it focuses on the effects of those investments since 1950 on costs and productivity of firms in the U.S. road freight transport industry. Using a theoretical and statistical model of regional truck firm costs, the paper documents that the rapid growth of highway infrastructure which occured between 1950 and 1973 had a strong and positive effect on productivity growth in trucking. Furthermore, the results indicate the benefits of these investments to be substantial — large enough to justify between one-third and one-half of the cost of the Federal-aid highway system over this period on the basis of benefits to trucking alone.

Imposing Linear Homogeneity on Box–Tidwell Flexible Functional Forms

This study confirms the higher productivity levels predicted by advocates of regulatory reform in trucking and shows that these gains have been substantial. Cost simulations suggest that, following a year of higher expenditures, efforts to remain competitive have yielded considerable cost savings that increase over time, from 1 percent in 1981 to 23 percent in 1984. The indirect effects of reform through the independent variables initially decrease costs, but later lead to higher costs. The cumulative effect has been a less than 1 percent increase in costs in 1980, becoming by 1984, a significant 16 percent productivity gain. Copyright 1990 by MIT Press.

Costly Gains to Breaking Up: LECs and the Baby Bells

A major policy goal of the Motor Carrier Act of 1980 was to provide the shipping public with more efficient truck freight rates. Unlike previous studies, which have focused on intrastate reforms or highly aggregated data, this article analyzes dynamically the effects of the act on the freight rates of Class I and II common carriers of general freight. In addition to estimating rate equations, we have estimated cost functions to derive reliable measures of marginal cost. The specified rate equation also includes variables expected to affect the elasticity of demand. Simulations indicate that deregulation has reduced rates from the very beginning and that the effect has grown over time. By 1983, reductions are conservatively in the 15-20% range and in the 25-35% range by 1985.

ON CALCULATING COST ELASTICITIES

This study provides empirical evidence concerning the economic feasibility of competition in the local market for video-delivery services. Using responses from the FCCs 1995 cost survey, we jointly estimate a translog cost function with factor share equations. To evaluate subadditivity, the fitted total cost of each firm is compared with the cost of two firms providing the same total output in eleven different market scenarios. Although costs were mildly superadditive, in the vast majority of cases they were lower when one firm provided the output. Average cost savings with respect to a monopoly were fairly small, ranging from 1.37 with a 10 market overlap to 5.05 with a complete overbuild. We also calculated marginal cost from the fitted total cost equation, and a price for cable services derived from the FCC survey data. Using these results and Rubinovitzs price elasticity of 1.46, we estimated that reregulation had a regulatory effectiveness of 0.3251 and held prices to 40.5 of the monopoly level.

Testing the Effectiveness of Regulation and Competition on Cable Television Rates

The authors consider two forms of the Box-Tidwell cost function, which uses the increasingly popular Box-Cox metric. If the dependent variable is the logarithm of cost, the function violates the regularity condition of homogeneity in factor prices, globally and locally. If cost is transformed by the Box-Cox metric, global homogeneity requires highly restrictive parameter constraints such that the model is no longer flexible, while local homogeneity is satisfied at only the base point of approximation. The authors demonstrate that normalizing the first model by the deleted factor price alters the model so that estimates are no longer invariant.