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Co-investment deterrence

Author

Listed:
  • López, Ángel L.
  • Manganelli, Anton-Giulio
  • Martín-Rodríguez, María

Abstract

We examine co-investment and access in a model of new network deployment. We show that the incumbent firm may find it optimal to deter co-investment by over-investing when the cost-sharing rule is based on its verified expenditure and the information on the deployment cost is asymmetric between the operators and the regulator. When partial deterrence is optimal, it occurs in the areas of intermediate attractiveness, consistently with the evidence found in other industries. A necessary and sufficient condition for deterrence to occur is that local industry profits are lower with than without co-investment. Results are robust to demand uncertainty.

Suggested Citation

  • López, Ángel L. & Manganelli, Anton-Giulio & Martín-Rodríguez, María, 2022. "Co-investment deterrence," Economics Letters, Elsevier, vol. 211(C).
    • Handle: RePEc:eee:ecolet:v:211:y:2022:i:c:s0165176521004900
    DOI: 10.1016/j.econlet.2021.110263
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    References listed on IDEAS

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    More about this item

    Keywords

    Access; Co-investment; Deterrence; Over-investments;
    All these keywords.

    JEL classification:

    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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