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Network interconnectivity with competition and regulation

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  • McHardy, Jolian
  • Reynolds, Michael
  • Trotter, Stephen

Abstract

A simple theoretical network model is introduced to investigate the problem of network interconnection. Prices, profits and welfare are compared under welfare maximisation, network monopoly and a scenario with competition over one part of the network. Given that inducing actual competition may bring disbenefits such as cost duplication and co-ordination costs, we also explore the possibility of a regulator using the threat of entry on a section of the monopoly network in order to bring about the socially preferred level of interconnectivity. We show that there are feasible parameter values for which such a threat is plausible.

Suggested Citation

  • McHardy, Jolian & Reynolds, Michael & Trotter, Stephen, 2013. "Network interconnectivity with competition and regulation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 47(C), pages 97-110.
    • Handle: RePEc:eee:transa:v:47:y:2013:i:c:p:97-110
    DOI: 10.1016/j.tra.2012.10.026
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    References listed on IDEAS

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