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Infrastructure Upgrades and Foreclosure with Coexistence of Service-Based and Facility-Based Firms

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  • Noriaki Matsushima
  • Keizo Mizuno

Abstract

We investigate the incentives for facility-based firms to invest in infrastructure upgrades and to foreclose service-based firms. We focus on asymmetric regulation regarding service-based firms' access to the infrastructure held by a facility-based firm. Spillovers from the infrastructure upgrades made by a regulated facility-based firm on service-based firms play a key role in the incentives for making these upgrades. The spillover effect can enhance the incentives for the regulated facility-based firm to make upgrades if access prices are not regulated. The existence of rival facility-based firms strengthens the incentives for a regulated facility-based firm to make infrastructure upgrades, especially when the spillover effect is significant. Furthermore, if access prices are not regulated, the existence of rival facility-based firms weakens the incentives for a regulated facility-based firm to foreclose service-based firms.

Suggested Citation

  • Noriaki Matsushima & Keizo Mizuno, 2012. "Infrastructure Upgrades and Foreclosure with Coexistence of Service-Based and Facility-Based Firms," ISER Discussion Paper 0860, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0860
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    References listed on IDEAS

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