Price Convergence in Contestable Market Structures: The Impact of Time and Price-Caps on Intercity Telecommunications Rates.

In this study, we tested if long-distance rates among AT&T, MCI, and US Sprint between New York City and six major SMSAs during 1980-91 have converged. Empirical findings show that rates have converged over time, that rate ratios or differences increased under price cap, and that distance does not have any impact on rate convergence. The variables of TIME and price cap (CAP) have greater impacts on rate convergence for AT&T/US Sprint than AT&T/MCI. Regression results based on pooled cross-section and time-series data yield better results. [ABSTRACT FROM AUTHOR]