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How regulation affects network and service quality in related markets

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  • Haucap, Justus
  • Klein, Gordon J.

Abstract

We analyze how network regulation affects investment into network infrastructure and complementary services. While regulation negatively affcets investment incentives in the regulated network market, the effects of network regulation on investment in complementary services can be either negative or positive, depending on the relative weight consumers assign to infrastructure versus service quality. We also find constellations, where regulation can enhance perceived total quality.

Suggested Citation

  • Haucap, Justus & Klein, Gordon J., 2012. "How regulation affects network and service quality in related markets," DICE Discussion Papers 52, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:52
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    References listed on IDEAS

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    1. João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
    2. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
    3. Farrell, Joseph & Katz, Michael L, 2000. "Innovation, Rent Extraction, and Integration in Systems Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 413-432, December.
    4. Kotakorpi, Kaisa, 2006. "Access price regulation, investment and entry in telecommunications," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 1013-1020, September.
    5. 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.
    6. Schuett Florian, 2010. "Network Neutrality: A Survey of the Economic Literature," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-15, June.
    7. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    8. Joshua S. Gans & Stephen P. King, 2004. "Access Holidays and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 89-100, March.
    9. 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.
    10. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    11. Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
    12. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, January.
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    Citations

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    Cited by:

    1. Klein, Gordon J. & Wendel, Julia, 2014. "The impact of local loop and retail unbundling," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106845, International Telecommunications Society (ITS).
    2. Cui, Shana & Besanko, David, 2016. "Horizontal versus vertical separation in railway networks: Implications for network quality," Economics Letters, Elsevier, vol. 138(C), pages 78-80.
    3. Klein, Gordon J. & Wendel, Julia, 2014. "The impact of local loop and retail unbundling revisited," DICE Discussion Papers 163, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. David Besanko & Shana Cui, 2016. "Railway restructuring and organizational choice: network quality and welfare impacts," Journal of Regulatory Economics, Springer, vol. 50(2), pages 164-206, October.
    5. Haucap, Justus & Heimeshoff, Ulrich, 2017. "Ordnungspolitik in der digitalen Welt," DICE Ordnungspolitische Perspektiven 90, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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