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Access Regulation under Asymmetric Information about Demand

Author Info

Listed author(s):
  • João Vareda

    ()

    (Autoridade da Concorrência)

Abstract

We study the impact of access regulation in a telecommunications market on an entrant?s decision whether to invest in a network or ask for access when the regulator cannot observe its potential demand. Since the entrant has incentives to not compete vigorously right after entry in order to convince the regulator that it needs cheap access in the future, the regulator must set access prices which tend to be distorted (lower or higher) as compared to fi?rst best. Still, this is better than committing to ignore ex post demand information. Consulting the entrant earlier about its expectations improves welfare and may help to achieve the ?first best.

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File URL: http://www.concorrencia.pt/download/WP30_reg_asymmetric_info.pdf
File Function: First version, 2007
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Paper provided by Portuguese Competition Authority in its series Working Papers with number 30.

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Length: 26 pages
Date of creation: Nov 2007
Handle: RePEc:pca:wpaper:30
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Keywords: Access Pricing; Asymmetric Information; Signaling; Revelation principle;

Other versions of this item:

Find related papers by JEL classification:
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
  • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
  • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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  1. Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, vol. 49(1), pages 173-199, January.
  2. João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
  3. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
  4. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  5. Paula Sarmento, 2003. "Entry Regulation under Asymmetric Information about Demand: A Signalling Model Approach," CEF.UP Working Papers 0304, Universidade do Porto, Faculdade de Economia do Porto.
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Cited by:

  1. Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the “Ladder of Investment†Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.
  2. Elisabetta Iossa & Francesca Stroffolini, 2012. "Vertical Integration and Costly Demand Information in Regulated Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 249-271, June.

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