Access regulation and the incumbent investment in quality-upgrades and in cost-reduction
AbstractThis papers studies if access price regulation has an impact on incumbents' incentives to invest in their network that might differ according to the nature of investments, that is, quality-upgrading and cost-reducing. It is shown that if the marginal cost of quality-upgrading is very low both types of investment are increasing in the access price. If the marginal cost of cost-reducing is very low, both investments decrease after an increase in the access price. Otherwise, a high access price increases the incentives for quality-upgrading and reduces the incentives for cost-reducing. Therefore, regulators should set a higher access price the lower is the marginal cost of quality-upgrading as compared to the marginal cost of cost-reducing.
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Bibliographic InfoArticle provided by Elsevier in its journal Telecommunications Policy.
Volume (Year): 34 (2010)
Issue (Month): 11 (December)
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description
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8th Asia-Pacific Regional ITS Conference, Taipei 2011: Convergence in the Digital Age
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