Date Issued: 
December 1, 1984

John Haring.  

OSP Working Paper 14 (Dec 1984) supports the idea that natural monopoly markets should be regulated if there are methods of regulation capable of generating net benefits (i.e., as long as the cure is not worse than the disease) and that effectively competitive markets should not be regulated.  Haring therefore addresses the critical question of how the FCC could determine whether (or the extent to which) a market is competitive or monopolistic. 

Toward that end, he examines the implications of asymmetric regulation for competition policy analysis. In particular, he considers how asymmetric regulation affects interpretation of market share data as evidence of effective competition or monopoly power.  Haring argues that current regulatory policy substantially weakens what is already a tenuous connection between market share and market power. 

Haring therefore concludes that, if decisions about deregulating AT&T are based primarily on the size of its market share, the pace and extent of deregulation are likely to be economically nonoptimal in the sense of "too little-too late" or "too much-too soon" -- or possibly both.