Infrastructure quality in deregulated industries: is there an underinvestment problem?
We investigate how various institutional settings affect a network providerï¿½s 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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- 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, July.
- 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.
- Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
- 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, July.
- Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
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