Book contents
- Frontmatter
- Contents
- Preface
- Acknowledgments
- Introduction
- PART I THE ECONOMICS OF NETWORKS
- PART II THE REGULATION OF NETWORKS
- 4 Network Regulation Basics
- 5 Economic Effects of Regulating Access to Networks
- 6 Pricing of Access to Networks
- 7 Constitutional Limits on the Pricing of Access to Networks
- PART III POLICY APPLICATIONS
- Conclusion
- Bibliography
- Index
- Table of Cases
6 - Pricing of Access to Networks
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface
- Acknowledgments
- Introduction
- PART I THE ECONOMICS OF NETWORKS
- PART II THE REGULATION OF NETWORKS
- 4 Network Regulation Basics
- 5 Economic Effects of Regulating Access to Networks
- 6 Pricing of Access to Networks
- 7 Constitutional Limits on the Pricing of Access to Networks
- PART III POLICY APPLICATIONS
- Conclusion
- Bibliography
- Index
- Table of Cases
Summary
The consensus economic position is that so long as competition is sufficiently robust, market prices represent the best reflection of value. The market price is the outcome of the forces of supply and demand. The supply side of the market reflects the costs to sellers of providing a good; the demand side reflects the benefits to buyers from consuming the good. At market equilibrium, prices are thus determined by the marginal cost to sellers of providing a good and the marginal benefit to buyers of consuming it. Prices are adjusted through the process of exchange to balance supply and demand and to clear the market, so that prices are further reflections of scarcity, the meeting of consumer wants, and supplier capacities.
Because the services of a network are comparable to the output of other types of production facilities, market processes can allocate them. Markets refer to the interaction of buyers and sellers, with market prices mediating between what buyers are willing to pay and what sellers are willing to accept. Market prices are determined through the activities of suppliers, customers, and intermediaries such as retailers and wholesalers. In the short run, firms raise prices when demand exceeds supply and lower prices when supply exceeds demand. In the long run, suppliers make production decisions by comparing the prices of goods to their costs and to the prices of alternative goods the supplier might provide.
- Type
- Chapter
- Information
- Networks in TelecommunicationsEconomics and Law, pp. 190 - 209Publisher: Cambridge University PressPrint publication year: 2009