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Delegating Infrastructure Projects with Open Access

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Author Info

  • Keizo Mizuno

    ()
    (School of Businiess Administration, Kwansei Gakuin University)

  • Testuya Shinkai

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

This paper provides a simple model that examines a firmfs incentive to invest in a network infrastructure through coalition formation in an open access environment with a deregulated retail market. A regulator faces a dilemma between inducing an incentive for efficient investment and reducing the distortion generated by imperfect competition. We show that, in such a case, the degree of cost-reducing effect of the investment is crucial from a welfare point of view. In particular, when network investment through coalition formation creates a large (small) cost-reducing effect, the regulator can (should not) delegate an investment decision to firms with an appropriate level of access charge.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp28.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 28.

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Length: 24 pages
Date of creation: Jan 2006
Date of revision: Jan 2006
Publication status: Published in Journal of Economics, 2006, vol. 88, issue 3, pages 243-261
Handle: RePEc:kgu:wpaper:28

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Keywords: Network infrastructure; Coalition; Access Charge; Delegation;

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  1. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  2. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
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Cited by:
  1. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Regulated Input Price, Vertical Separation, and Leadership in Free Entry Markets," ISER Discussion Paper 0853, Institute of Social and Economic Research, Osaka University.
  2. Knut Einar Rosendahl & Eirik Lund Sagen, 2007. "The Global Natural Gas Market. Will transport cost reductions lead to lower prices?," Discussion Papers 523, Research Department of Statistics Norway.

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