ure of a network affects its total costs and performance. Because network architecture is important, it may not be feasible to relate total costs to the collection of network elements, because the way that the elements are combined also affects total costs. The interaction between network elements may affect the costs of giving competitors access to network elements. Network theory can be used to understand how access mandates impact the capacity and performance of the network, which can be helpful in determining the opportunity cost component of ECPR. The debate over pricing methodologies involves many additional issues, such as historical costs versus replacement costs, the anticipation of obsolescence, and the recovery of opportunity costs of foregone sales. Networks in Telecommunications A. The Economic Case for Market-Based Pricing of Network Access 1. Market Prices, Regulated Prices, and Efficiency Market prices promote allocative and dynamic efficiency. As noted in Chapter 4, efficient allocation of goods occurs when the purchasers of a particular good are those who obtain the greatest benefit from consumption and the suppliers of the good are those who incur the lowest cost of production. By allocating the good or service to the person or firm willing to pay the most, the price mechanism ensures that goods and services are placed in the hands of those able to put them to their best use. The price mechanism further ensures that goods and services are provided by the most efficient suppliers. Dynamic efficiency is attained when economic actors make efficient investment decisions. Investment decisions are efficient when the present discounted value of the marginal returns to invest equals the marginal cost of investment. Market prices provide incentives for efficient investment decisions because the market prices of services created by capital facilities are the best measure of the marginal benefit derived by users of those services. A firm deciding whether to invest in production facilities makes efficient 