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Should Network Operators Be Allowed To Build Joint Facilities?

  • Ramiro Losada


In this paper, we address the issue of how the possibility for areements among network operators about building joint facilities affects their networks qualities, their profits and social welfare. We show that allowing the network operators to build joint facilities can make the network operators to increase their network qualities when they decide so simultaneously. When we analyze entry, only the incumbent increases his network quality. The main result is that network operators and the regulator coincide in thier decisions about how much the network operators should build jointly when the network operators decide simultaneously their network qualities. The same result arises when we analyze entry and the network operators are sufficiently differentiated. But, if there is entry and the network operators are not sufficiently differentiated, a regulator is hended to force the network operators to build joint facilities, what is very surprising from the current National Regulatory point of vie w.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we043914.

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Date of creation: Jul 2004
Date of revision:
Handle: RePEc:cte:werepe:we043914
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  1. Philippe Chone & Laurent Flochel & Anne Perrot, 2000. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Econometric Society World Congress 2000 Contributed Papers 0213, Econometric Society.
  2. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP 823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Cambini, Carlo & Valletti, Tommaso, 2003. "Investments and Network Competition," CEPR Discussion Papers 3829, C.E.P.R. Discussion Papers.
  4. Ding Lu, 2001. "Shared network investment," Journal of Economics, Springer, vol. 73(3), pages 299-312, October.
  5. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
  6. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
  7. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  8. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
  9. James J. McAndrews & Rafael Rob, 1994. "Shared ownership and pricing in a network switch," Working Papers 94-6, Federal Reserve Bank of Philadelphia.
  10. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
  11. Anton, James J. & Vander Weide, James H. & Vettas, Nikolaos, 2002. "Entry auctions and strategic behavior under cross-market price constraints," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 611-629, May.
  12. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2002. "Allocating and funding universal service obligations in a competitive market," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1247-1276, November.
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