IDEAS home Printed from
   My bibliography  Save this paper

Efficiency of Uniform Pricing in Universal Service Obligation


  • 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.

Suggested Citation

  • Jean-Christophe Poudou & Michel Roland, 2013. "Efficiency of Uniform Pricing in Universal Service Obligation," Working Papers 13-13, LAMETA, Universtiy of Montpellier, revised Nov 2013.
  • Handle: RePEc:lam:wpaper:13-13

    Download full text from publisher

    File URL:
    File Function: First version, 2013
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Center for Research in Economics and Statistics.
    2. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-359, December.
    3. Axel Gautier & Xavier Wauthy, 2010. "Price competition under universal service obligations," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(3), pages 311-326.
    4. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    5. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    6. Poudou Jean-Christophe & Roland Michel & Thomas Lionel, 2009. "Universal Service Obligations and Competition with Asymmetric Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, October.
    7. Foros, Oystein & Kind, Hans Jarle, 2003. "The Broadband Access Market: Competition, Uniform Pricing and Geographical Coverage," Journal of Regulatory Economics, Springer, vol. 23(3), pages 215-235, May.
    8. Iñaki Aguirre, 2008. "Output and misallocation effects in monopolistic third-degree price discrimination," Economics Bulletin, AccessEcon, vol. 4(11), pages 1-11.
    9. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    10. Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September.
    11. Iñaki Aguirre, 2006. "Monopolistic price discrimination and output effect under conditions of constant elasticity demand," Economics Bulletin, AccessEcon, vol. 4(23), pages 1-6.
    12. Jerry A. Hausman & Jeffrey K. MacKie-Mason, 1988. "Price Discrimination and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 253-265, Summer.
    13. Christian Jaag & Urs Trinkner, 2011. "The future of the USO - Economic rationale for universal services and implications for a future-oriented USO," Working Papers 0026, Swiss Economics.
    14. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    15. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    16. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    17. Jaag Christian, 2011. "What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-32, September.
    18. 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 169-190, March.
    19. Bourguignon, Helene & Ferrando, Jorge, 2007. "Skimming the other's cream: Competitive effects of an asymmetric universal service obligation," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 761-790, August.
    20. Alleman, James & Rappoport, Paul & Banerjee, Aniruddha, 0. "Universal service: A new definition?," Telecommunications Policy, Elsevier, vol. 34(1-2), pages 86-91, February.
    21. Cheung, Francis K. & Wang, X. Henry, 1999. "A note on the effect of price discrimination on entry: Research note," Journal of Economics and Business, Elsevier, vol. 51(1), pages 67-72, January.
    22. Orada TEPPAYAYON & Erik BOHLIN, 2010. "Broadband universal service in Europe:A review of policy consultations 2005-2010," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(80), pages 21-42, 4th quart.
    23. 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.
    24. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2013. "Does Banning Price Discrimination Promote Entry And Increase Welfare? A Model Of Differentiated-Product Duopoly With Asymmetric Markets," Manchester School, University of Manchester, vol. 81(4), pages 660-681, July.
    25. Axel Gautier & Keizo Mizuno, 2011. "Gradual Network Expansion And Universal Service Obligations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(2), pages 97-113, June.
    26. Calzada, Joan, 2009. "Universal service obligations in the postal sector: The relationship between quality and coverage," Information Economics and Policy, Elsevier, vol. 21(1), pages 10-20, February.
    27. Crew, Michael A & Kleindorfer, Paul R, 1998. "Efficient Entry, Monopoly, and the Universal Service Obligation in Postal Service," Journal of Regulatory Economics, Springer, vol. 14(2), pages 103-125, September.
    28. 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.
    29. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Houpis, George & Serdarevic, Goran & Vetterle, Jonas, 2016. "Supply-side measures for policy makers to promote mobile broadband coverage," 27th European Regional ITS Conference, Cambridge (UK) 2016 148674, International Telecommunications Society (ITS).
    2. repec:eee:indorg:v:52:y:2017:i:c:p:63-95 is not listed on IDEAS

    More about this item

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lam:wpaper:13-13. 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: (Patricia Modat). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.