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Service provision on a network with endogenous consumption capacity

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Author Info

  • Nikolaos Georgantzis

    ()
    (Universitat Jaume I)

  • Carlos Gutiérrez-Hita

    (Universidad de Alicante)

Abstract

We 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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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-01.pdf
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2008-01.

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Length: 21 pages
Date of creation: Mar 2008
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2008-01

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Keywords: telecommunications markets; regulation; endogenous consumption.;

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References

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  1. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  2. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
  3. Dessein, Wouter, 2003. " Network Competition in Nonlinear Pricing," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 593-611, Winter.
  4. de Bijl,Paul & Peitz,Martin, 2008. "Regulation and Entry into Telecommunications Markets," Cambridge Books, Cambridge University Press, number 9780521066631, November.
  5. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February.
  6. Martin Peitz, 2005. "Asymmetric Regulation of Access and Price Discrimination in Telecommunications," Journal of Regulatory Economics, Springer, vol. 28(3), pages 327-343, November.
  7. de Bijl, Paul W.J. & Peitz, Martin, 2005. "Local Loop Unbundling in Europe: Experience, Prospects and Policy Challenges," MPRA Paper 2511, University Library of Munich, Germany.
  8. Carlos Gutiérrez-Hita & Martin Peitz, 2001. "Retailer Locations, Local Supply And Price Policies," Working Papers. Serie AD 2001-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
  10. Bijl, P.W.J. de & Peitz, M., 2004. "Unbundling the Local Loop: One-Way Access and Imperfect Competition," Discussion Paper 2004-025, Tilburg University, Tilburg Law and Economic Center.
  11. Shane Greenstein & Michael Mazzeo, 2006. "THE ROLE OF DIFFERENTIATION STRATEGY IN LOCAL TELECOMMUNICATION ENTRY AND MARKET EVOLUTION: 1999-2002 -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 54(3), pages 323-350, 09.
  12. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
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Cited by:
  1. Iñigo Iturbe-Ormaetxe Kortajarene & Marisa Hidalgo, 2009. "Should we transfer resources from college to basic education?," Working Papers. Serie AD 2009-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Garcia-Rosa, Alfonso & Kiss, Hubert Janos & Rodriguez-Lara, Ismael, 2010. "Do Social Networks Prevent Bank Runs?," UMUFAE Economics Working Papers 9723, DIGITUM. Universidad de Murcia.
  3. Francisco Martinez-Sanchez, 2011. "Collusion, competition and piracy," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1043-1047.
  4. Christian A. Stoltenberg & Vadym Lepetyuk, 2009. "Policy announcements and welfare," Working Papers. Serie AD 2009-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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