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Result 4: Market Intervention Is Desirable

An important result of this study is that market intervention that would promote greater service penetration in these study areas is desirable since collusive behavior, even if implicit, do occur. Such behavior will impact the number of households receiving service. We refer to Table 4, Table 1a and Table 1b. We note the total number of households served in each service area using Cournot quantities or cooperative quantities. In service area A this is 21765 households using Cournot quantities and 20741 using cooperative quantities. Dividing each sum by the number of households in service area A, which is 26419 households, comes to 82.38 tex2html_wrap_inline247 and 78.51 tex2html_wrap_inline247 respectively. In other words, the number of households served in a market such as this would be well below expectations for universal service, if the market were left to market forces.

Figure 1. Provider0 Discounted Value versus Trigger Price (tp)

Figure 2. Provider0 versus Provider1 Output Response Curves

Figure 3. Provider1 Discounted Value versus Trigger Price (tp)

Figure 4. Provider0 Discounted Value versus Reversion Length (T)

Figure 5. Provider1 Discounted Value versus Reversion Length (T)

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Judith Molka-Danielsen
Wed Sep 10 14:34:53 CEST 1997