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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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    Cited by:

    1. Poudou, Jean-Christophe & Roland, Michel, 2017. "Equity justifications for universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 63-95.
    2. 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.
    3. Bojan Jovanović & Dragana Šarac & Nataša Čačić, 2025. "Delphi and fuzzy TOPSIS approach for redefining the scope of postal universal service obligation," Journal of Regulatory Economics, Springer, vol. 68(1), pages 38-52, August.

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