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Broadband Investment and the Threat of Regulation: Preventing Monopoly Exploitation or Infrastructure Construction?

Author

Listed:
  • Blum Ulrich

    (Halle Institute for Economic Research)

  • Growitsch Christian

    (Scientific Institute for Infrastructure and Communication Services WIK)

  • Krap Niels

    (Halle Institute for Economic Research)

Abstract

Recently, investments in new generation networks in Germany have been curtailed, since potential investors required this new network be unregulated. To develop a regulator's strategy that allows investments to occur but prevents monopolistic prices, we model an investor's decision problem under a threat of regulation. We show that the mere threat of a regulator's intervention may prevent supernormal profits without actual price regulation. The regulator, on the other hand, can influence both the investment decision and the investor's price via her signals on regulation probability and price.

Suggested Citation

  • Blum Ulrich & Growitsch Christian & Krap Niels, 2007. "Broadband Investment and the Threat of Regulation: Preventing Monopoly Exploitation or Infrastructure Construction?," Review of Network Economics, De Gruyter, vol. 6(3), pages 1-13, September.
    • Handle: RePEc:bpj:rneart:v:6:y:2007:i:3:n:5
    DOI: 10.2202/1446-9022.1124
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    Cited by:

    1. Navio-Marco, J & Solorzano-Garcia, M & Urueña, A., 2015. "Language As Key Factor Of Long-Term Value Creation In Mergers And Acquisitions In The Telecommunications Sector," 26th European Regional ITS Conference, Madrid 2015 127170, International Telecommunications Society (ITS).
    2. Navío-Marco, Julio & Solórzano-García, Marta & Matilla-García, Mariano & Urueña, Alberto, 2016. "Language as a key factor of long-term value creation in mergers and acquisitions in the telecommunications sector," Telecommunications Policy, Elsevier, vol. 40(10), pages 1052-1063.
    3. Paula Sarmento & António Brandão, 2009. "Next Generation Access Networks: The Effects of Vertical Spillovers on Access and Innovation," FEP Working Papers 321, Universidade do Porto, Faculdade de Economia do Porto.

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