Deregulating Network Industries: Dealing with Price-Quality Tradeoffs
Journal
Journal of Regulatory Economics
ISSN
0922-680X
ISSN-Digital
1573-0468
Type
journal article
Date Issued
2006-07-01
Author(s)
Abstract
This paper examines the effects of introducing competition into monopolized
network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we first show that deregulating an integrated monopoly
cannot simultaneously decrease the retail price and increase infrastructure quality.
Second, we derive conditions under which reducing both retail price and infrastructure quality relative to the integrated monopoly outcome increases welfare. Third, we argue that restructuring and setting very low access charges may yield welfare losses as infrastructure investment is undermined. We provide an extensive analysis of the linear demand model and discuss policy implications.
network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we first show that deregulating an integrated monopoly
cannot simultaneously decrease the retail price and increase infrastructure quality.
Second, we derive conditions under which reducing both retail price and infrastructure quality relative to the integrated monopoly outcome increases welfare. Third, we argue that restructuring and setting very low access charges may yield welfare losses as infrastructure investment is undermined. We provide an extensive analysis of the linear demand model and discuss policy implications.
Language
English
Keywords
Infrastructure quality · Deregulation · Investment incentives · Access
charges · Regulation
charges · Regulation
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Springer
Publisher place
Norwell, Mass.
Volume
30
Number
1
Start page
99
End page
115
Pages
17
Subject(s)
Eprints ID
244897