Competition and access price regulation in the broadband market
AbstractWe construct a model for differentiated Cournot competition between service-based and infrastructure-based firms, out of which one infrastructure-based firm (the incumbent) supplies to the service-based firms. We seek for and compare the socially optimal and the incumbent’s profit maximizing access price in two scenarios: (i) service-based firms and incumbent supply homogeneous services (partial differentiation), and (ii) all services are horizontally differentiated (uniform differentiation). We show that in both cases the incumbent never forecloses service-based firms if infrastructure-based competition is present or if services are somewhat differentiated. Under uniform differentiation the welfare optimizing access price is below marginal cost, hence the incumbent subsidizes the production of service-based firms and makes zero profit. In the case of partial differentiation, the same result obtains when both markets are concentrated. However, if markets are not concentrated, the socially optimal access fee exceeds the marginal cost.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 106.
Date of creation: Jun 2008
Date of revision:
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-14 (All new papers)
- NEP-COM-2008-07-14 (Industrial Competition)
- NEP-CSE-2008-07-14 (Economics of Strategic Management)
- NEP-IND-2008-07-14 (Industrial Organization)
- NEP-MIC-2008-07-14 (Microeconomics)
- NEP-NET-2008-07-14 (Network Economics)
- NEP-REG-2008-07-14 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Distaso, Walter & Lupi, Paolo & Manenti, Fabio M., 2006.
"Platform competition and broadband uptake: Theory and empirical evidence from the European union,"
Information Economics and Policy,
Elsevier, vol. 18(1), pages 87-106, March.
- Walter Distaso & Paolo Lupi & Fabio M. Manenti, 2005. "Platform Competition and Broadband Uptake: Theory and Empirical Evidence from the European Union," Industrial Organization 0504019, EconWPA.
- Bourreau, Marc & Hombert, Johan & Pouyet, Jérôme & Schutz, Nicolas, 2007.
"Wholesale Markets in Telecommunications,"
CEPR Discussion Papers
6224, C.E.P.R. Discussion Papers.
- Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, June.
- Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157, CPB Netherlands Bureau for Economic Policy Analysis.
- Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.