IDEAS home Printed from https://ideas.repec.org/a/eee/indorg/v37y2014icp141-152.html
   My bibliography  Save this article

Efficiency of uniform pricing in universal service obligations

Author

Listed:
  • Poudou, Jean-Christophe
  • Roland, Michel

Abstract

We provide an efficiency justification for the imposition of the uniform pricing constraint in universal service obligations (USO), where USO are defined as a set of constraints imposed on firms belonging to a network industry. In addition to the uniform pricing (UP) constraint, which is an obligation to serve all consumers at an identical price, constraints considered are the coverage constraint (CC), which is an obligation imposed on one of the firms to serve a given segment of the market, and the license constraint (LC), which is a minimum or a maximum coverage restriction that is imposed on entrants. We show that adding the UP constraint to both a CC and a LC leads to an increase in welfare. Our contribution comes from the full recognition of the role of a LC in well-designed USO and we illustrate this role with the particular case of linear demand.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:141-152
    DOI: 10.1016/j.ijindorg.2014.08.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167718714000861
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Axel Gautier & Xavier Wauthy, 2010. "Price competition under universal service obligations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(3), pages 311-326.
    2. Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Center for Research in Economics and Statistics.
    3. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    4. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-359, December.
    5. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    6. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
    7. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    8. Jaag Christian, 2011. "What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-32, September.
    9. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-190, March.
    10. Bourguignon, Helene & Ferrando, Jorge, 2007. "Skimming the other's cream: Competitive effects of an asymmetric universal service obligation," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 761-790, August.
    11. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    12. Poudou Jean-Christophe & Roland Michel & Thomas Lionel, 2009. "Universal Service Obligations and Competition with Asymmetric Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, October.
    13. Alleman, James & Rappoport, Paul & Banerjee, Aniruddha, 0. "Universal service: A new definition?," Telecommunications Policy, Elsevier, vol. 34(1-2), pages 86-91, February.
    14. Cheung, Francis K. & Wang, X. Henry, 1999. "A note on the effect of price discrimination on entry: Research note," Journal of Economics and Business, Elsevier, vol. 51(1), pages 67-72, January.
    15. Orada TEPPAYAYON & Erik BOHLIN, 2010. "Broadband universal service in Europe:A review of policy consultations 2005-2010," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(80), pages 21-42, 4th quart.
    16. Foros, Oystein & Kind, Hans Jarle, 2003. "The Broadband Access Market: Competition, Uniform Pricing and Geographical Coverage," Journal of Regulatory Economics, Springer, vol. 23(3), pages 215-235, May.
    17. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    18. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2002. "Allocating and funding universal service obligations in a competitive market," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1247-1276, November.
    19. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2013. "Does Banning Price Discrimination Promote Entry And Increase Welfare? A Model Of Differentiated-Product Duopoly With Asymmetric Markets," Manchester School, University of Manchester, vol. 81(4), pages 660-681, July.
    20. 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.
    21. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    22. Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September.
    23. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
    24. Calzada, Joan, 2009. "Universal service obligations in the postal sector: The relationship between quality and coverage," Information Economics and Policy, Elsevier, vol. 21(1), pages 10-20, February.
    25. Crew, Michael A & Kleindorfer, Paul R, 1998. "Efficient Entry, Monopoly, and the Universal Service Obligation in Postal Service," Journal of Regulatory Economics, Springer, vol. 14(2), pages 103-125, September.
    26. Anton, James J. & Vander Weide, James H. & Vettas, Nikolaos, 2002. "Entry auctions and strategic behavior under cross-market price constraints," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 611-629, May.
    27. Christian Jaag & Urs Trinkner, 2011. "The future of the USO - Economic rationale for universal services and implications for a future-oriented USO," Working Papers 0026, Swiss Economics.
    28. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    29. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Houpis, George & Serdarevic, Goran & Vetterle, Jonas, 2016. "Supply-side measures for policy makers to promote mobile broadband coverage," 27th European Regional ITS Conference, Cambridge (UK) 2016 148674, International Telecommunications Society (ITS).
    2. repec:eee:indorg:v:52:y:2017:i:c:p:63-95 is not listed on IDEAS

    More about this item

    Keywords

    Universal service obligations; Coverage and price constraints; Regulation;

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:141-152. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505551 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.