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Should Uniform Pricing Constraints be Imposed on Entrants?

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  • Hoerning, Steffen
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    Abstract

    We analyse the effects of universal service obligations, such as uniform pricing, price caps and unbundling, on allocations in markets newly opened to competition, e.g. telecommunications. If uniform pricing is imposed not only on incumbents but also on entrants, entry may not result in competition if installed capacity is low, or may neglect high-cost areas if installed capacity or mandated coverage is high. These results hold no matter whether a price cap is in place or not, and do not depend on whether entry is capacity-based or facilitated through unbundling.

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    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2002/wp417.pdf
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    Bibliographic Info

    Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp417.

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    Length: 27 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:unl:unlfep:wp417

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    Related research

    Keywords: Universal Service Obligations; Uniform Pricing; Price caps; Unbundling; Entry;

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    References

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    1. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    2. Armstrong, M. & Vickers, J., 1992. "Price Discrimination, Competition and Regulation," Economics Series Working Papers 99140, University of Oxford, Department of Economics.
    3. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
    4. Anton, James J. & Vander Weide, James H. & Vettas, Nikolaos, 2002. "Entry auctions and strategic behavior under cross-market price constraints," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 611-629, May.
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    Cited by:
    1. Steffen Hoernig, 2006. "Should uniform pricing constraints be imposed on entrants?," Journal of Regulatory Economics, Springer, vol. 30(2), pages 199-216, 08.

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