Endogenous Average Cost Based Access Pricing
AbstractWe analyze an endogenous average cost based access pricing rule,where both the regulated firm and its rivals realize the interdependence among their output and the regulated access price. In contrast, the existing literature on access pricing has always assumed the access price to be exogenously fixed ex-ante. We show that endogenous access pricing fully neutralizes the dominance enjoyed by the incumbent firm, and that the consumer surplus is equal to or larger than under exogenous access pricing. If the entrants are more efficient than the incumbent, then the welfare under endogenous access pricing is higher than under exogenous access pricing.
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Bibliographic InfoPaper provided by University of Cincinnati, Department of Economics in its series University of Cincinnati, Economics Working Papers Series with number 2006-01.
Length: 21 pages
Date of creation: 2006
Date of revision:
Other versions of this item:
- NEP-ALL-2006-01-24 (All new papers)
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