New Networks, Competition and Regulation
AbstractWe consider a model with two firms operating their individual networks. Each firm can choose its price as well as its investment to build up its network. Assuming a skewed distribution of consumers, our model leads to an asymmetric market structure with one firm choosing higher investments. While access regulation imposed on the dominant firm leads to lower prices, positive welfare effects are diminished by strategic investment decisions of the firms. Within a dynamic game with indirect network effects leading to potentially increased demand, regulation can substantially lower aggregate social welfare. Conditional access holidays can alleviate regulatory failure.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 568.
Length: 30 p.
Date of creation: 2006
Date of revision:
Regulation; network effects; natural monopoly;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-22 (All new papers)
- NEP-COM-2006-04-22 (Industrial Competition)
- NEP-CSE-2006-04-22 (Economics of Strategic Management)
- NEP-MIC-2006-04-22 (Microeconomics)
- NEP-NET-2006-04-22 (Network Economics)
- NEP-REG-2006-04-22 (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.:
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