Regulation in Telecommunications for Societal Welfare: An Overview

TH. SHARATCHAND MEETEI

Abstract


The existence of large fixed costs in several parts of the telecommunications network makes the industry exist under natural monopoly or oligopoly. The incentive of gain in long-run however motivates new firms entry into the market. The new firms lower price by sacrificing short-run gains in their effort to enter into the market and the incumbent firms, on the other hand, respond to the new price to sustain in the market. Nevertheless, the incentives of gain in long-run under the large fixed costs distort the existing market in short-run unless the market is properly regulated. This paper examines the competition and regulation prevailing in the Indian telecommunications market and describes a model of price caps in an attempt to minimize the market distortion and improve societal welfare.


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ISSN : 2251-1563