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Universal service obligations in LDCs: The effect of uniform pricing on infrastructure access

  • Estache, Antonio
  • Laffont, Jean-Jacques
  • Zhang, Xinzhu

This paper develops a model to analyze the impacts of asymmetric information on optimal universal service policy in the public utilities of developing countries. Optimal universal service policy is implemented using two regulatory instruments: pricing and network investment. Under discriminatory pricing asymmetric information leads to a higher price and smaller network in the rural area than under full information. Under uniform pricing the price is also lower but the network is even smaller. In addition, under both pricing regimes not only the firm but also taxpayers have incentives to collude with the regulator. © 2005 Elsevier B.V. All rights reserved.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4H2PJFJ-1/2/4c3668ca1b5003e7f49a29005b1c0299
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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 6-7 (August)
Pages: 1155-1179

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:6-7:p:1155-1179
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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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. H. Cremer & F. Gasmi & A. Grimaud & J. J. Laffont, 2001. "Universal Service: An economic perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 72(1), pages 5-43, 03.
  3. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  4. Omar Chisari & Antonio Estache & Catherine Waddams Price, 2003. "Access by the poor in Latin America's utility reform: subsidies and service obligations," Chapters, in: Utility Privatization and Regulation, chapter 2 Edward Elgar.
  5. Gasmi, F. & Laffont, J. J. & Sharkey, W. W., 2000. "Competition, universal service and telecommunications policy in developing countries," Information Economics and Policy, Elsevier, vol. 12(3), pages 221-248, September.
  6. Laffont, Jean-Jacques & N'Gbo, Ake, 2000. "Cross-subsidies and network expansion in developing countries," European Economic Review, Elsevier, vol. 44(4-6), pages 797-805, May.
  7. Clarke, George R.G. & Wallsten, Scott J., 2002. "Universal(ly bad) service - providing infrastructure services to rural and poor urban consumers," Policy Research Working Paper Series 2868, The World Bank.
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