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Estimation of loss in consumer surplus resulting from excessive pricing

January 2012

Econometric study for OECD

OECD asked Microeconomix to estimate the loss in consumer surplus resulting from excessive pricing in the Mexican telecommunication sector. 

Econometric techniques were used to evaluate loss in consumer surplus caused by a supposedly low degree of competition in the Mexican telecommunication sector, and to estimate the prices for telecommunication services and the corresponding numbers of subscriptions to telecommunication services that would have been observed in Mexico if there had been more competition in the Mexican telecommunication sector. The estimation applied a 3SLS technique to OECD telecommunication pricing data (price baskets for the mobile and fixed telecommunication and the evolution of a representative broadband subscription over time for broadband); OECD data on the number of subscriptions (number of fixed paths, number of mobile subscriptions and number of broadband subscriptions); and OECD/World Bank data concerning various factors affecting the number of subscriptions or the costs of those subscriptions (such as population size, age distribution, level of education, degree of urbanisation and population density).