IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Strategic Choice of Financing Systems in Regulated and Interconnected Industries

  • Bassanini, Anna
  • Pouyet, Jérôme

The growing importance of inter-network exchanges in infrastructure-based utilities influences regulatory choices and access-pricing for downstream services using the networks. We analyse this problem in a setting where the infrastructure managers of two bordering countries are in charge of pricing the access to their networks for downstream transport firms that provide international services. Network costs can be financed either through a subsidy or solely through user charges. Access charges are affected by the incomplete internalization of consumers’ surplus and infrastructure costs. Because of these distortions, it turns out that in a non-cooperative setting the second-best outcome consists in the simultaneous adoption of the no-subsidy system. Either this outcome is not an equilibrium, however, or the two countries could end up by choosing either the subsidy or the no-subsidy system, depending on the magnitude of the fixed costs of the networks and the characteristics of the final demand for services; moreover, in the latter case, the second-best outcome is not a stable equilibrium. Other properties of these equilibria are studied, as well as the impact of supra-national policies aimed at alleviating the excessive pricing of access on international services. The coordination problems deriving from the existence of different equilibria can, sometimes, be partially solved by separating the choice of a regulatory mode from the access pricing stage, thereby allowing the infrastructure managers to commit to use a specific financing system before setting the access price.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3888.

in new window

Date of creation: May 2003
Date of revision:
Handle: RePEc:cpr:ceprdp:3888
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  2. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  3. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  4. Gagnepain, P. & Ivaldi, M., 1999. "Incentive Regulatory Policies: the Case of Public Transit Systems in France," Papers 99.515, Toulouse - GREMAQ.
  5. Anna Bassanini & Jérôme Pouyet, 2004. "Strategic Choice of Financing Systems in Regulated and Interconnected Industries," Working Papers 2004-08, Centre de Recherche en Economie et Statistique.
  6. 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.
  7. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, June.
  8. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  9. Ming Chang, 1996. "Ramsey pricing in a hierarchical structure with an application to network-access pricing," Journal of Economics, Springer, vol. 64(3), pages 281-314, October.
  10. Ken Hendricks & Michele Piccione & Guofu Tan, 1997. "Entry and Exit in Hub-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 291-303, Summer.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3888. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.