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Delegating Infrastructure Projects with Open Access

Author

Listed:
  • Keizo Mizuno

    () (School of Businiess Administration, Kwansei Gakuin University)

  • Testuya Shinkai

    () (School of Economics, Kwansei Gakuin University)

Abstract

This paper provides a simple model that examines a firm fs incentive to invest in a network infrastructure through coalition formation in an open access environment with a deregulated retail market. A regulator faces a dilemma between inducing an incentive for efficient investment and reducing the distortion generated by imperfect competition. We show that, in such a case, the degree of cost-reducing effect of the investment is crucial from a welfare point of view. In particular, when network investment through coalition formation creates a large (small) cost-reducing effect, the regulator can (should not) delegate an investment decision to firms with an appropriate level of access charge.

Suggested Citation

  • Keizo Mizuno & Testuya Shinkai, 2006. "Delegating Infrastructure Projects with Open Access," Discussion Paper Series 28, School of Economics, Kwansei Gakuin University, revised Jan 2006.
  • Handle: RePEc:kgu:wpaper:28
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp28.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
    2. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
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    Cited by:

    1. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Access Charge, Vertical Separation, and Lobbying," Discussion Papers 2009-11, Kobe University, Graduate School of Business Administration.
    2. Knut Einar Rosendahl & Eirik Lund Sagen, 2009. "The Global Natural Gas Market: Will Transport Cost Reductions Lead to Lower Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 17-40.
    3. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Regulated Input Price, Vertical Separation, and Leadership in Free Entry Markets," ISER Discussion Paper 0853, Institute of Social and Economic Research, Osaka University.

    More about this item

    Keywords

    Network infrastructure; Coalition; Access Charge; Delegation;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General

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