Access and Interconnection Pricing: How Efficient is the "Efficient Component Pricing Rule"?
23 Pages Posted: 19 Jul 1995
Date Written: March 1995
This paper critiques some of the properties of the so-called "efficient component pricing rule" (ECPR) for access to a bottleneck (monopoly) facility. When a rival and the bottleneck monopolist both produce a complementary component to the bottleneck service, the ECPR specifies that the access fee paid by the rival to the monopolist should be equal to the monopolist's opportunity costs of providing access, including any forgone revenues from a concomitant reduction in the monopolist's sales of the complementary component. We focus especially on the case in which the monopolist's price for the complementary component is above all relevant marginal costs. In this case the ECPR's exclusion of rivals may be socially harmful, since it may be preventing a substantial decrease in the price of the complementary component.
JEL Classification: L1, L5, L2
Suggested Citation: Suggested Citation