An expanding economics literature has examined the theoretical linkages between mandatory unbundling in the telecommunications sector and the incentives to invest in facilities by both incumbent local carriers and competitive carriers. Recent empirical evidence that substantiates the theory has emerged. That literature documents CLECs’ reluctance to make facilities-based investments instead of availing themselves of incumbents’ UNEs at low regulated prices that are based on total element long-run incremental costs (TELRIC). By examining the variation in facilities-based investment in loops across U.S. states and over time, we find that facilities-based line growth relative to UNE growth was faster in states where the cost of UNEs was higher relative to the cost of facilities-based investment.

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This paper derives a regression-based test to detect bidder-auctioneer cheating in sealed bid auctions. I apply this regression test to data from the New York City School Construction Authority auctions, an approximate one billion dollar per year auction market in which an auctioneer engaged in bidder-auctioneer cheating. Using the regression analysis to compare lots where bid rigging occurred with certainty to all other auctions allows one to conclude that bidder-auctioneer cheating significantly distorted the bid distribution. Comparing specific auctioneer lots before news of the cheating scandal became public with those after the scandal, I find significant differences in bidding, at the 10 percent level of significance, for two auctioneers. Therefore, bidder-auctioneer cheating may not have been limited to the one auctioneer charged with rigging bids.

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