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Efficiency of Uniform Pricing in Universal Service Obligation

Listed author(s):
  • Jean-Christophe Poudou
  • Michel Roland

We provide an efficiency justi cation for the imposition of the uniform pricing constraint in universal service obligations (USO), where USO are de fined as a set of constraints imposed on fi rms belonging to a network industry. Besides the uniform pricing (UP) constraint, which is an obligation to serve all consumers at an identical price, constraints considered are the coverage constraint (CC), an obligation imposed to one of the firms to serve a given segment of the market, as well as the license constraint (LC), a minimum or a maximum coverage restriction imposed on entrants. We show that adding the UP constraint to both a CC and a LC brings an increase in welfare. Our contribution comes from the full recognition of the role of a LC in well-designed USO and we illustrate this role with the particular case of linear demand.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2013-13.pdf
File Function: First version, 2013
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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 13-13.

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Length: 29 pages
Date of creation: Nov 2013
Date of revision: Nov 2013
Handle: RePEc:lam:wpaper:13-13
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