Gradual Network Expansion and Universal Service Obligations
AbstractUniversal service obligations are usually not competitively neutral as they modify the way firms compete in the market. In this paper, we consider a continuum of local markets in a dynamic setting with a stochastically growing demand. The incumbent must serve all markets (ubiquity) possibly at a uniform price and an entrant decides on its market coverage before firms compete in prices. Connecting a market involves a sunk cost. We show that the imposition of a uniform price constraint modifies the timing of entry: for low connection cost markets, entry occurs earlier while for high connection cost markets, entry occurs later.
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Bibliographic InfoPaper provided by Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège in its series CREPP Working Papers with number 1105.
Date of creation: 2011
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Other versions of this item:
- Axel Gautier & Keizo Mizuno, 2011. "Gradual Network Expansion And Universal Service Obligations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(2), pages 97-113, 06.
- NEP-ALL-2011-04-30 (All new papers)
- NEP-COM-2011-04-30 (Industrial Competition)
- NEP-MKT-2011-04-30 (Marketing)
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- De Villemeur Etienne Billette & Cremer Helmuth & Boldron Francois & Roy Bernard, 2008. "Worksharing: A Calibrated Model," Review of Network Economics, De Gruyter, vol. 7(2), pages 1-22, June.
- D’ALCANTARA, Gonzales & GAUTIER, Axel, . "National postal strategies after a full postal market opening," CORE Discussion Papers RP -2006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- repec:rne:rneart:v:7:y:2008:i:2:p:272-293 is not listed on IDEAS
- Jean-Christophe Poudou & Michel Roland, 2013. "Efficiency of Uniform Pricing in Universal Service Obligation," Working Papers 13-13, LAMETA, Universtiy of Montpellier, revised Nov 2013.
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