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Price competition under universal service obligations

Author

Listed:
  • GAUTIER, Axel
  • WAUTHY, Xavier Y.

Abstract

In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service obligations are likely to alter firms' strategic behavior in such competitive markets. In the present paper, we show that, depending on the entrant's market coverage and the degree of product differentiation, the Nash equilibrium in prices involves either pure or mixed strategies. We show that the pure strategy market sharing equilibrium, as identified by Valletti, Hoernig, and Barros (2002), defines a lower bound on the level of equilibrium prices.
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Suggested Citation

  • GAUTIER, Axel & WAUTHY, Xavier Y., 2010. "Price competition under universal service obligations," LIDAM Reprints CORE 2219, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2219
    DOI: 10.1111/j.1742-7363.2010.00137.x
    Note: In : International Journal of Economic Theory, 6(3), 311-326, 2010
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    Cited by:

    1. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    2. Axel Gautier & Jean-Christophe Poudou & Michel Roland, 2024. "Net Neutrality and Universal Service Obligations: It’s All About Bandwidth," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(4), pages 581-614, June.
    3. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    4. Axel Gautier & Leonardo Madio & Shiva Shekhar, 2025. "Network Externalities and Platform Strategy: Agency, Bundles Entry, and Integration," CESifo Working Paper Series 11711, CESifo.
    5. Shanker A. Singham & U. Srinivasa Rangan, 2018. "Anti‐Competitive Market Distortions: A Typology," Economic Affairs, Wiley Blackwell, vol. 38(3), pages 339-347, October.
    6. Paul Belleflamme & Wing Man Wynne Lam, & Wouter Vergote, 2020. "Competitive Imperfect Price Discrimination and Market Power," Marketing Science, INFORMS, vol. 39(5), pages 996-1015, September.
    7. Axel Gautier & Jean-Christophe Poudou, 2025. "Dynamic Platform Competition 'In' and 'For' the Market," CESifo Working Paper Series 12218, CESifo.
    8. Bourreau, Marc & Manenti, Fabio M., 2023. "Selling cross-border in online markets: The impact of the ban on geoblocking strategies," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    9. 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.
    10. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2019. "Exclusive Data, Price Manipulation and Market Leadership," CESifo Working Paper Series 7853, CESifo.
    11. Poudou, Jean-Christophe & Roland, Michel, 2017. "Equity justifications for universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 63-95.
    12. 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.

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