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Gradual Network Expansion And Universal Service Obligations

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  • Axel Gautier
  • Keizo Mizuno

Abstract

Universal 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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Suggested Citation

  • 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, June.
  • Handle: RePEc:bla:annpce:v:82:y:2011:i:2:p:97-113
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    References listed on IDEAS

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    1. 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.
    2. Gonzales d’Alcantara & Axel Gautier, 2008. "National Postal Strategies after a Full Postal Market Opening," Chapters,in: Competition and Regulation in the Postal and Delivery Sector, chapter 12 Edward Elgar Publishing.
    3. repec:cor:louvrp:-2006 is not listed on IDEAS
    4. repec:bpj:rneart:v:7:y:2008:i:2:p:272-293 is not listed on IDEAS
    5. Gonzales d’Alcantara & Axel Gautier, 2008. "National Postal Strategies after a Full Postal Market Opening," Chapters,in: Competition and Regulation in the Postal and Delivery Sector, chapter 12 Edward Elgar Publishing.
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    Cited by:

    1. Poudou, Jean-Christophe & Roland, Michel, 2014. "Efficiency of uniform pricing in universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 141-152.
    2. repec:eee:indorg:v:52:y:2017:i:c:p:63-95 is not listed on IDEAS

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