Access Regulation and Welfare
Abstract In a 2006 paper, Graeme Guthrie underlined that “[T]he impact of access price level on investment is not yet fully understood” and that “even less is known about the overall impact on welfare” (Guthrie 2006, p. 965). Although important progress has been made on the former issue, the latter remains largely underinvestigated. This paper contributes to addressing this question by analyzing the optimal access price in different investment games. Our main findings are as follows: 1. When only one firm can invest and when only service-based competition is feasible, the optimal access price is such as the flat part is as high as possible and the variable part equals the marginal cost. 2. The optimal variable part is lower when only service-based competition is possible than when several firms can invest, although there is too much duplication in the latter case. 3. When several firms can invest, the optimal access price is such as the flat part is as high as possible and the variable part is higher than the marginal cost. These results arise because the variable part determines both private incentives to invest and to duplicate and the extent to which investment and duplication are socially desirable.
|Date of creation:||Dec 2011|
|Date of revision:||Dec 2011|
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- Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
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Elsevier, vol. 49(1), pages 173-199, January.
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CEPR Discussion Papers
2789, C.E.P.R. Discussion Papers.
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- Keiichi Hori & Keizo Mizuno, 2009. "Competition schemes and investment in network infrastructure under uncertainty," Journal of Regulatory Economics, Springer, vol. 35(2), pages 179-200, April.
- Vareda João & Hoernig Steffen, 2010. "Racing for Investment under Mandatory Access," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-31, July.
- Nitsche, Rainer & Wiethaus, Lars, 2011. "Access regulation and investment in next generation networks -- A ranking of regulatory regimes," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 263-272, March.
- Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 3851, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
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