In class we just got done talking about price floors and ceilings. As noted in class when these are applied to the economy they create inefficiencies and the market cannot run to its fullest capabilities. In this article it discusses the possibility of regulation with cell phones. Currently cell phone companies have high costs for customers that do not keep to their contract agreement. Many cell phone companies make their customers sign five to ten year contracts making it hard to switch to other competitors. By having these high switching costs it causes most customers to stay with the company even though they would rather go to another competing one. With government regulation they can create a price floor, and enforce how much the cell phone companies can charge. Also they can limit the amount of “sneakiness” or hidden costs.
In this article it found many advocates for the government to get involved. Christine Mailloux, a telecommunications attorney was noted by saying, “Consumers can't count on competition alone to get wireless companies to become more customer-friendly.” She instead believes this can be solved through stronger regulations. However, we as business students have been taught that regulation creates barriers for effective trading. So which side is right? Should the government intervene and regulate? Or do you think over time the competition will drive down the costs?