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Next Generation Access Networks: The Effects of Vertical Spillovers on Access and Innovation

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  • Paula Sarmento

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto)

  • António Brandão

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto)

Abstract

The model that we develop here considers that an upstream firm sells a vital input to downstream firms. There are vertical spillovers and two different regulatory policies of the input price: cost oriented regulation and no-regulation. We also admit two alternative market structures: vertical integration and vertical separation. With this setting we study the effects of the spillovers on foreclosure and on the investment of the upstream firm with and without access price regulation in the two market structures. We conclude that in this setting foreclosure is not a necessary outcome and that the investment of the upstream firm depends on the values of the spillovers of each firm. The increase of the investment with regulation is more likely with vertical separation but it can also happen with vertical integration although this is not a typical result.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 321.

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Length: 14 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:por:fepwps:321

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Keywords: access price regulation; vertical integration;

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  1. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, vol. 80(3), pages 641-42, June.
  2. Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
  3. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
  5. Blum Ulrich & Growitsch Christian & Krap Niels, 2007. "Broadband Investment and the Threat of Regulation: Preventing Monopoly Exploitation or Infrastructure Construction?," Review of Network Economics, De Gruyter, vol. 6(3), pages 1-13, September.
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