Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction
AbstractWe study the investment of a telecommunications incumbent in quality and in cost reduction when an entrant can use its network through unbundling of the local loop. We ?nd that unbundling may lower incentives for quality improvements, but raises incentives for cost reduction. Therefore, it is not true that all types of investment are crowded out with unbundling. If the regulator can commit to a socially optimal unbundling price before investment, the incumbent makes both types of investment. In the absence of commitment, the incumbent will not invest, so that unbundling regulation may lower welfare as compared to no regulation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp526.
Length: 30 pages
Date of creation: 2007
Date of revision:
Contact details of provider:
Web page: http://www.fe.unl.pt
Other versions of this item:
- João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-12 (All new papers)
- NEP-COM-2008-01-12 (Industrial Competition)
- NEP-MIC-2008-01-12 (Microeconomics)
- NEP-NET-2008-01-12 (Network Economics)
- NEP-REG-2008-01-12 (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.:
- Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
- Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
- Vareda, João & Hoernig, Steffen, 2007.
"The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?,"
FEUNL Working Paper Series
wp524, Universidade Nova de Lisboa, Faculdade de Economia.
- João Vareda & Steffen Hoernig, 2007. "The race for telecoms infrastructure investment with bypass: Can access regulation achieve the first best?," Working Papers 29, Portuguese Competition Authority.
- Bastos Vareda, João Miguel & Hoernig, Steffen, 2007. "The Race for Telecoms Infrastructure Investment with Bypass: Can Access Regulation Achieve the First-best?," CEPR Discussion Papers 6203, C.E.P.R. Discussion Papers.
- Biglaiser, G. & Ma, C.T.A., 1996.
"Investment Incentives of a Regulated Dominant Firm,"
UFAE and IAE Working Papers
340.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Biglaiser, Gary & Ma, Ching-To Albert, 1999. "Investment Incentives of a Regulated Dominant Firm," Journal of Regulatory Economics, Springer, vol. 16(3), pages 215-35, November.
- Biglaiser, G. & Ma, C.A., 1996. "Investment Incentives of a Regulated Dominant Firm," Papers 67, Boston University - Industry Studies Programme.
- Gary Biglaiser & Ching-to Albert Ma, 1996. "Investment Incentives of a Regulated Dominant Firm," Papers 0067, Boston University - Industry Studies Programme.
- Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, June.
- Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
- Valletti, Tommaso M., 0. "The theory of access pricing and its linkage with investment incentives," Telecommunications Policy, Elsevier, vol. 27(10-11), pages 659-675, November.
- Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, vol. 49(1), pages 173-199, January.
- Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
- Cambini, Carlo & Valletti, Tommaso M., 2004. "Access charges and quality choice in competing networks," Information Economics and Policy, Elsevier, vol. 16(3), pages 391-409, September.
- Bijl, P.W.J. de & Peitz, M., 2004. "Unbundling the Local Loop: One-Way Access and Imperfect Competition," Discussion Paper 2004-025, Tilburg University, Tilburg Law and Economic Center.
- Chang, Hsihui & Koski, Heli & Majumdar, Sumit K., 0. "Regulation and investment behaviour in the telecommunications sector: policies and patterns in US and Europe," Telecommunications Policy, Elsevier, vol. 27(10-11), pages 677-699, November.
- Kotakorpi, Kaisa, 2006. "Access price regulation, investment and entry in telecommunications," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 1013-1020, September.
- João Vareda, 2007.
"Access Regulation under Asymmetric Information about Demand,"
30, Portuguese Competition Authority.
- Vareda, João, 2007. "Access Regulation under Asymmetric Information about Demand," FEUNL Working Paper Series wp525, Universidade Nova de Lisboa, Faculdade de Economia.
- Haucap, Justus & Klein, Gordon J., 2012.
"How regulation affects network and service quality in related markets,"
DICE Discussion Papers
52, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Haucap, Justus & Klein, Gordon J., 2012. "How regulation affects network and service quality in related markets," Economics Letters, Elsevier, vol. 117(2), pages 521-524.
- Bourreau, Marc & Dogan, Pinar, 2010.
"Level of Access and Competition in Broadband Markets,"
Working Paper Series
rwp10-006, Harvard University, John F. Kennedy School of Government.
- Bourreau Marc & Dogan Pinar, 2012. "Level of Access and Competition in Broadband Markets," Review of Network Economics, De Gruyter, vol. 11(1), pages 1-33, March.
- Bourreau, Marc & Dogan, Pinar, 2010. "Level of Access and Competition in Broadband Markets," Scholarly Articles 4454152, Harvard Kennedy School of Government.
- Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157, CPB Netherlands Bureau for Economic Policy Analysis.
- Lars-Hendrik Röller, 2009. "Auswirkungen von Regulierung auf das Investitionsverhalten in Netzindustrien: Die europäische Telekommunikationsindustrie," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 62(10), pages 12-15, 05.
- repec:ieb:wpaper:2012/3/doc2012-1 is not listed on IDEAS
- Benjamin Pakula & Georg Götz, 2011. "Organisational Structures in Network Industries – An Application to the Railway Industry," MAGKS Papers on Economics 201109, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sean Story).
If references are entirely missing, you can add them using this form.