Service provision on a network with endogenous consumption capacity
AbstractWe present a model in which the consumers' capacity to access a service provided on a network depends negatively on the price charged by the network owner per capacity unit. Several scenarios concerning the structure of the downstream service provision market are studied. First, a monopolist operates in both the network and the service provision stage. Second, we assume duopolistic competition between the network owner and the entrant. Third, we allow for endogenous differentiation of the services provided by the two competitors. Generally speaking, the duopolistic structure does not necessarily enhance consumer surplus. Furthermore, competition in the service provision market may reduce social welfare, either due to excessive differentiation or due to a low network density.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2008-01.
Length: 21 pages
Date of creation: Mar 2008
Date of revision:
Publication status: Published by Ivie
telecommunications markets; regulation; endogenous consumption.;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-20 (All new papers)
- NEP-MIC-2008-07-20 (Microeconomics)
- NEP-NET-2008-07-20 (Network Economics)
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