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Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?

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Author Info
Benz, Men-Andri
Bühler, Stefan
Schmutzler, Armin

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Abstract

We investigate how various institutional settings affect a network provider’s incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counter-examples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3836.

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Date of creation: Mar 2003
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Handle: RePEc:cpr:ceprdp:3836

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Related research
Keywords: investment incentives networks quality vertical externality

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Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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  1. Fernando Branco, 1997. "The Design of Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 63-81, Spring. [Downloadable!] (restricted)
  2. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
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Cited by:
(explanations, 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.)

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  2. Lalive, Rafael & Schmutzler, Armin, 2005. "Competition for Railway Markets: The Case of Baden-Württemberg," CEPR Discussion Papers 5396, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Brennan, Timothy, 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers dp-05-50, Resources For the Future. [Downloadable!]
  4. Andreas Schulze, 2004. "Alternative Liberalisierungsansätze in Netzindustrien," Volkswirtschaftliche Diskussionsbeiträge 64, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät. [Downloadable!]
  5. Stefan Buehler & Dennis Gaertner & Daniel Halbheer, 2004. "Deregulating Network Industries: Dealing with Price-Quality Tradeoffs," Working Papers 0402, University of Zurich, Socioeconomic Institute, revised Oct 2005. [Downloadable!]
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  7. Hans Gersbach & Armin Schmutzler, 2004. "Globalization and General Worker Training," Working Papers 0403, University of Zurich, Socioeconomic Institute. [Downloadable!]
  8. Cpb, 2004. "Better safe than sorry? Reliability policy in network industries," CPB Documents 73, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  9. Harry Telser & Karolin Becker & Peter Zweifel, 2004. "Validity and Reliability of Willingness-to-Pay Estimates: Evidence from Two Overlapping Discrete-Choice Experiments," Working Papers 0412, University of Zurich, Socioeconomic Institute, revised Mar 2008. [Downloadable!]
  10. Andreas Polk & Armin Schmutzler, 2003. "Lobbying against Environmental Regulation vs. Lobbying for Loopholes," Working Papers 0301, University of Zurich, Socioeconomic Institute. [Downloadable!]
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  11. Harry Telser & Peter Zweifel, 2003. "Validity of Discrete-Choice Experiments - Evidence for Health Risk Reduction," Working Papers 0313, University of Zurich, Socioeconomic Institute, revised Feb 2005. [Downloadable!]
  12. Peter Zweifel & Harry Telser & Stephan Vaterlaus, 2005. "Consumer Resistance Against Regulation: The Case of Health Care," Working Papers 0505, University of Zurich, Socioeconomic Institute. [Downloadable!]
  13. Michael Breuer, 2003. "Multiple Losses, Ex-Ante Moral Hazard, and the Non-Optimality of the Standard Insurance Contract," Working Papers 0302, University of Zurich, Socioeconomic Institute, revised Apr 2003. [Downloadable!]
  14. Michael Breuer, 2004. "Deductible or Co-Insurance: Which is the Better Insurance Contract under Adverse Selection?," Working Papers 0401, University of Zurich, Socioeconomic Institute, revised Oct 2004. [Downloadable!]
  15. Christian von Hirschhausen, 2006. "Infrastructure Investments and Resource Adequacy in the Restructured US Natural Gas Market – Is Supply Security at Risk?," Working Papers 0618, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
  16. Stefan Buehler & Armin Schmutzler, 2003. "Asymmetric Vertical Integration," Working Papers 0306, University of Zurich, Socioeconomic Institute, revised Nov 2004. [Downloadable!]
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  17. Stefan Buehler & Armin Schmutzler, 2005. "On The Role of Access Charges Under Network Competition," Working Papers 0501, University of Zurich, Socioeconomic Institute. [Downloadable!]
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