Deregulating Network Industries: Dealing with Price-Quality Tradeoffs
AbstractThis paper examines the e®ects of introducing competition into monopolized network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we ¯rst show that deregulating an integrated monopoly cannot simultaneously decrease the retail price and increase infrastructure quality. Second, we derive conditions under which reducing both retail price and infrastructure quality relative to the integrated monopoly outcome increases welfare. Third, we argue that restructuring and setting very low access charges may yield welfare losses, as infrastructure investment is undermined. We provide an extensive analysis of the linear demand model and discuss policy implications.
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Bibliographic InfoPaper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0402.
Length: 27 pages
Date of creation: Jan 2004
Date of revision: Oct 2005
Publication status: Published in Journal of Regulatory Economics 30(1), 99-115, 2006
infrastructure quality; deregulation; investment incentives; access charges; regulation;
Other versions of this item:
- Stefan Buehler & Dennis Gärtner & Daniel Halbheer, 2006. "Deregulating Network Industries: Dealing with Price-quality Tradeoffs," Journal of Regulatory Economics, Springer, vol. 30(1), pages 99-115, 07.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-12 (All new papers)
- NEP-COM-2006-02-12 (Industrial Competition)
- NEP-ENE-2006-02-12 (Energy Economics)
- NEP-MIC-2006-02-12 (Microeconomics)
- NEP-NET-2006-02-12 (Network Economics)
- NEP-REG-2006-02-12 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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