Cost, pricing and productivity issues in telecommunications.
Item
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Title
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Cost, pricing and productivity issues in telecommunications.
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Identifier
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AAI9707158
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identifier
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9707158
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Creator
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Vaz, Christopher.
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Contributor
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Adviser: David Gabel
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Date
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1996
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, General | Economics, Commerce-Business
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Abstract
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Price cap regulation in the telecommunications industry has become more widespread, supplementing or displacing rate-of-return regulation in a number of areas. Under price cap regulation a firm is permitted to increase its price by the amount of the GDP Price Index minus a productivity factor. Much debate centers on an appropriate productivity offset to be used in this calculation, and on the most suitable way by which this productivity factor should be measured.;In many applications of price cap regulation, economists have used what has come to be known as the traditional approach to measuring the change in Total Factor Productivity (TFP). In this approach, aggregate indices of output and input are separately calculated and the growth in TFP is taken as the difference between the aggregate output and input growth rates.;This study examines whether the traditional approach correctly measures a firm's productivity change. It does this by comparing the traditional TFP measure with one based on a model of a local telephone exchange's cost, the Local Exchange Cost Optimization Model (LECOM). It then computes a measure of TFP using the transcendental logarithmic (translog) cost function. This is a flexible function which comprehensively captures the interrelationships between the changing structures of a firm's outputs and inputs. Productivity change is captured by a time-trend variable which measures the change in cost resulting from productivity change as separate from changes in other factors.;Detailed data for 28 cities in the State of Indiana served by The Indiana Bell Telephone Company are used to compare estimates of TFP change using the traditional and the translog approaches. Each provides a measure of TFP change over the same period of time, 1984-91, and a significant difference is found. Using the traditional TFP approach, annual TFP growth was found to average 3.7% in this period; using the translog approach, average annual TFP growth was found to be between 7.4% and 8.0%.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
