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I wonder if it would make more sense to just have a profit cap. Like “internet must be provided to low-income New Yorkers at cost + 10%”. That way it’s always a
by tjs8rj 6y ago
I wonder if it would make more sense to just have a profit cap. Like “internet must be provided to low-income New Yorkers at cost + 10%”. That way it’s always at least profitable to reach more people.
The predictable result of the above is plenty of people getting cheap internet, but perhaps many people won’t get it at all because it doesn’t make any sense for Verizon to get the internet to them if they can’t recoup their investment - so they simply won’t. The above “profit cap” preserves the incentives for Verizon while achieving the boost in consumer surplus.
- dheera 6y agoWhat is "at cost"? If they increase everyone's salaries in Comcast by 50% then "at cost" increases by 50%. Or they could order 5-star Michelin dining delivered by helicopters to WFH employees and call it a "business meal", and "at cost" would be higher as well. Too easy to abuse.
- the-dude 6y agoLet me introduce you to Hollywood accounting : https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
- karmakaze 6y agoThe way to maximize profits in a "cost + 10%" scenario is to maximize cost x market, thus maximizing the 10% x market. Setting an indirect target is the quickest way to having a bad economic policy--if you want affordable internet legislate it and let the market figure out efficient ways to achieve it.
- tjs8rj 6y agoGood point. There has to be a better way than price caps though, price controls are well studied and have a tendency to reduce aggregate consumer surplus