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Infrastructure quality in deregulated industries: is there an underinvestment problem?

  • Buehler, Stefan
  • Schmutzler, Armin
  • Benz, Men-Andri

We investigate how various institutional settings affect a network provider’s incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counter-examples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration.

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File URL: http://www.sciencedirect.com/science/article/B6V8P-49R5HDD-1/2/90858bf2e01574c90e049560e3824d8a
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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 22 (2004)
Issue (Month): 2 (February)
Pages: 253-267

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Handle: RePEc:eee:indorg:v:22:y:2004:i:2:p:253-267
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  2. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
  3. Berndt, Arnold & Kunz, Martin, 1999. "Trassenpreise, InfraCard und Kostendeckung: Diskriminierungsfreier Zugang zum Schienennetz der Deutschen Bahn AG," Discussion Papers 64, University of Freiburg, Institute for Transport Economics and Regional Policy.
  4. W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, June.
  5. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
  6. repec:cup:cbooks:9780521645348 is not listed on IDEAS
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