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Strategic investments under competition for access provision

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  • Matsushima, Noriaki
  • Mizuno, Keizo

Abstract

We examine competition for access provision when symmetric vertically integrated firms invest in infrastructure upgrades. Spillovers through access have two effects (a wholesale-profit effect and a retail-production effect) on infrastructure investment made by vertically integrated firms. When the vertically integrated firms freely set access charges, due to the dominance of the wholesale-profit effect, quality differentials endogenously occur between these firms (asymmetric equilibria). When access charges are regulated, symmetric equilibria occur with multiple equilibrium investments due to the retail-production effect. Because competition for access provision induces a strong incentive for infrastructure investment, it also achieves a higher social welfare than does access regulation.

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  • Matsushima, Noriaki & Mizuno, Keizo, 2018. "Strategic investments under competition for access provision," Telecommunications Policy, Elsevier, vol. 42(2), pages 127-144.
    • Handle: RePEc:eee:telpol:v:42:y:2018:i:2:p:127-144
    DOI: 10.1016/j.telpol.2017.09.005
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    Cited by:

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    2. Sahebali, M.W.W. & Sadowski, Bert M. & Nomaler, O. & Brennenraedts, R., 2021. "Rolling out of fibre optic networks in intermediate versus urban areas: An exploratory spatial analysis in the Netherlands," Telecommunications Policy, Elsevier, vol. 45(5).

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    More about this item

    Keywords

    Access provision; Infrastructure upgrades; Spillovers;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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