Gradual Network Expansion and Universal Service Obligations
Universal service obligations are usually not competitively neutral as they modify the way firms compete in the market. In this paper, we consider a continuum of local markets in a dynamic setting with a stochastically growing demand. The incumbent must serve all markets (ubiquity) possibly at a uniform price and an entrant decides on its market coverage before firms compete in prices. Connecting a market involves a sunk cost. We show that the imposition of a uniform price constraint modifies the timing of entry: for low connection cost markets, entry occurs earlier while for high connection cost markets, entry occurs later.
|Date of creation:||2011|
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- De Villemeur Etienne Billette & Cremer Helmuth & Boldron Francois & Roy Bernard, 2008. "Worksharing: A Calibrated Model," Review of Network Economics, De Gruyter, vol. 7(2), pages 1-22, June.
- Gonzales d’Alcantara & Axel Gautier, 2008.
"National Postal Strategies after a Full Postal Market Opening,"
in: Competition and Regulation in the Postal and Delivery Sector, chapter 12
Edward Elgar Publishing.
- D’ALCANTARA, Gonzales & GAUTIER, Axel, "undated". "National postal strategies after a full postal market opening," CORE Discussion Papers RP 2006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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