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Re: Today at VON
by
geoffrey manne
Susan: On the Verizon charge, at least, the data point does not necesarily suggest monopoly. It might -- but it also might be that demand at this price is fairly inelastic. Which would cause the incidence of a tax to fall more (or even entirely) on the consumer. Which would also mean that removal of the tax even in a perfectly competitive market could lead to a price increase (where consumers are willing to pay the real price (price plus the tax) there would be no competitive reason for sellers to leave that money on the table). It all depends on the availablility and relative price of substitutes.
Actually, for similar reasons, it doesn't necessarily tell you anything that cable prices are going up. It could well be that there is more competition and more bandwidth, but, say, for well-known network effect reasons, the value of a higher-speed cable connection to consumers is also going up (and the desirability of certain substitutes (i.e., dial-up internet communication or telephones or postal service) falling). Under such conditions you'd see price increases even where there is plenty of competition.
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