Strategic Choice of Financing Systems in Regulated and Interconnected Industries
The growing importance of inter-network exchanges in infrastructure-based utilities influencesregulatory choices and access pricing for downstream services using the networks. Weanalyze this problem in a setting where the infrastructure managers of two bordering countriesare in charge of pricing the access to their networks for downstream transport firms thatprovide international services. Network costs can be financed either through public fundsand user charges. Access prices are affected by the incomplete internalization of consumers’surplus and infrastructure costs; we analyze how this distortion at the access pricing levelgenerates a distortion in the levels of public funds dedicated to infrastructure financing.Because of these distortions, it turns out that in a non-cooperative setting the secondbestoutcome might consist in the simultaneous adoption of the no-subsidy system. However,multiple equilibria typically exist and the second-best outcome is never a stable equilibrium.Other properties of the different possible equilibria are studied, as well as the impact ofsupra-national policies aimed at encouraging the development of international services.The coordination problems deriving from the existence of multiple equilibria can, sometimes,be 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 systembefore setting the access price. However, our analysis unveils that, since the choice a regulatorymode in a country strategically affects the pricing of access in the other country,non-cooperative infrastructure managers might have free-riding incentives when decidingthe financing system for their own network.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: 15 Boulevard Gabriel Peri 92245 Malakoff Cedex|
Phone: 01 41 17 60 81
Web page: http://www.crest.fr
More information through EDIRC
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.:
- Philippe Gagnepain & Marc Ivaldi, 2002.
"Incentive Regulatory Policies: The Case of Public Transit Systems in France,"
RAND Journal of Economics,
The RAND Corporation, vol. 33(4), pages 605-629, Winter.
- Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory policies: The Case of Public Transit Systems in France," Post-Print hal-00622846, HAL.
- Gagnepain, Philippe & Ivaldi, Marc, 1999. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," IDEI Working Papers 84, Institut d'Économie Industrielle (IDEI), Toulouse.
- Gagnepain, P. & Ivaldi, M., 1999. "Incentive Regulatory Policies: the Case of Public Transit Systems in France," Papers 99.515, Toulouse - GREMAQ.
- Brander, James A. & Spencer, Barbara J., 1985.
"Export subsidies and international market share rivalry,"
Journal of International Economics,
Elsevier, vol. 18(1-2), pages 83-100, February.
- James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Bassanini, Anna & Pouyet, Jérôme, 2003.
"Strategic Choice of Financing Systems in Regulated and Interconnected Industries,"
CEPR Discussion Papers
3888, C.E.P.R. Discussion Papers.
- Bassanini, Anna & Pouyet, Jerome, 2005. "Strategic choice of financing systems in regulated and interconnected industries," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 233-259, February.
- 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.
- BASSANINI, Anna & POUYET, Jérôme, 2002. "Strategic choice of financing systems in regulated and interconnected industries," CORE Discussion Papers 2002017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509, December.
- Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
- 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.
- 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, December.
When requesting a correction, please mention this item's handle: RePEc:crs:wpaper:2004-08. 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: (Florian Sallaberry)
If references are entirely missing, you can add them using this form.