Co-investments and tacit collusion in regulated network industries: Experimental evidence
AbstractWith the use of a laboratory experiment, we show the effects of co-investments on coverage, competition and price collusion in regulated network industries. On the one hand, co-investments turn out not to be a significant driver of new infrastructure investments beyond the level achieved by access regulation and they seem to facilitate tacit price collusion. On the other hand, co-investments economize on infrastructure investment costs and necessitate communication, which partially offset the aforementioned effects. In fact, communication between the firms on their future coverage, especially outside co-investments, seems to have a positive effect on investments. However, the surprising message of the experiment is that tacit collusion happens under co-investment although there is no reason to believe that it should and although we made almost every effort to prevent it. Our results indicate that regulators should evaluate co-investments with scrutiny as there are definite drawbacks that must be considered. --
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Bibliographic InfoPaper provided by International Telecommunications Society (ITS) in its series 23rd European Regional ITS Conference, Vienna 2012 with number 60389.
Date of creation: 2012
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experimental economics; network industries; co-investment; collusion; regulation;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
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