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Vertical Product Differentiation, Network Competition and Regulation of Connectivity

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  • D. Lanzi

Abstract

In this paper competition between two network firms is analysed under two alternative regulatory regimes: a global connectivity regulation (GCR) and an efficient component pricing regulation (ECPRe). Whereas a GCR imposes a full quality of reciprocal interconnection, firms will choose vertical product differentiation in order to lower price competition, while under a ECPRe they will choose the maximum level of services quality and a global degradation of connectivity. Hence firms’ decisions about whether or not vertically differentiate products seems to be, at least partially, related to regulatory rules imposed on the market.

Suggested Citation

  • D. Lanzi, 2001. "Vertical Product Differentiation, Network Competition and Regulation of Connectivity," Working Papers 405, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:405
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