The Pricing of Inputs Sold to Competitors: Rejoinder and Epilogue

William J. Baumol & J. Gregory Sidak

12 Yale Journal on Regulation 177 (1995)


This brief note has two purposes. First, we seek to avoid misunderstandings about the position we take after the appearance of the two extensive comments on our recent essay concerning the efficient component-pricing rule in this Journal. To summarize, we are in essential agreement with the comments of Professor Alfred Kahn and Dr. William Taylor, while, as is hardly surprising, we are totally unconvinced by Dr. William Tye’s discussion.

Our second, and larger, purpose is to report on the recent decision of the Judicial Committee of the Privy Council of the House of Lords that embraced our efficient component-pricing rule as a principle consistent with New Zealand antitrust law. The ruling emerged from a proceeding concerning the permissible price that the incumbent Telecom Corporation of New Zealand may charge the entrant Clear Communications for access to its local telephone network.

We conclude with some remarks about the likelihood that other courts and regulators, particularly those in the United States, will adopt the efficient component-pricing rule.

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