Phoning Home: The Procurement of Telecommunications for Incarcerated Individuals in the United States

Incarcerated individuals in the U.S. purchase goods and services from monopoly vendors selected by their correctional authority. We study telecommunications, which have come under bipartisan scrutiny due to the high prices inmates pay for phone calls. Prospective providers are evaluated on their technical capabilities, the prices they would charge, and the “commission” they would pay the correctional authority. Using data from public records requests, we estimate a first-score auction model with evaluation uncertainty and multi-dimensional bidder heterogeneity. The model indicates that reducing the role of commissions in procurement lowers prices, whereas increasing competition among providers mainly raises commissions. Moreover, recent federal regulations that ban commissions and cap prices likely preserve providers' profitability.