A government is concerned about persistently high prices in the national telecommunications market, which is dominated by a few large firms. They suspect these firms are colluding. To promote long-term, sustainable competition and prevent future collusion, which of the following two policy proposals is the more effective strategy, and why?
Proposal X: Launch a major investigation and impose a one-time, multi-billion dollar fine on any firm found guilty of price-fixing.
Proposal Y: Auction off additional radio frequency spectrum licenses to new companies and simplify the regulations for building new network infrastructure.
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A government is concerned about persistently high prices in the national telecommunications market, which is dominated by a few large firms. They suspect these firms are colluding. To promote long-term, sustainable competition and prevent future collusion, which of the following two policy proposals is the more effective strategy, and why?
Proposal X: Launch a major investigation and impose a one-time, multi-billion dollar fine on any firm found guilty of price-fixing.
Proposal Y: Auction off additional radio frequency spectrum licenses to new companies and simplify the regulations for building new network infrastructure.
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