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On the performance of endogenous access pricing

Author

Listed:
  • Kenneth Fjell
  • Debashis Pal
  • David Sappington

Abstract

Endogenous access pricing (ENAP) is an alternative to the traditional procedure of setting a fixed access price that reflects the regulator’s estimate of the supplier’s average cost of providing access. Under ENAP, the access price reflects the supplier’s actual average cost of providing access, which varies with realized industry output. We show that in addition to eliminating the need to estimate industry output accurately and avoiding a divergence between upstream revenues and costs, ENAP can enhance the incentive of a vertically integrated producer to minimize its upstream operating cost. However, ENAP can sometimes discourage surplus-enhancing investment. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Kenneth Fjell & Debashis Pal & David Sappington, 2013. "On the performance of endogenous access pricing," Journal of Regulatory Economics, Springer, vol. 44(3), pages 237-250, December.
    • Handle: RePEc:kap:regeco:v:44:y:2013:i:3:p:237-250
    DOI: 10.1007/s11149-013-9232-9
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    References listed on IDEAS

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    1. Federico Boffa & John Panzar, 2012. "Bottleneck co-ownership as a regulatory alternative," Journal of Regulatory Economics, Springer, vol. 41(2), pages 201-215, April.
    2. Tardiff Timothy J., 2002. "Pricing Unbundled Network Elements and the FCC's TELRIC Rule: Economic and Modeling Issues," Review of Network Economics, De Gruyter, vol. 1(2), pages 1-15, September.
    3. Sidak,J. Gregory & Spulber,Daniel F., 1998. "Deregulatory Takings and the Regulatory Contract," Cambridge Books, Cambridge University Press, number 9780521591591, September.
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    5. Estache, Antonio & Valletti, Tommaso, 1999. "The Theory of Access Pricing: an Overview for Infrastructure Regulators," CEPR Discussion Papers 2133, C.E.P.R. Discussion Papers.
    6. Tilman Klumpp & Xuejuan Su, 2010. "Open Access and Dynamic Efficiency," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 64-96, May.
    7. Vareda, João, 2010. "Access regulation and the incumbent investment in quality-upgrades and in cost-reduction," Telecommunications Policy, Elsevier, vol. 34(11), pages 697-710, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Endogenous access pricing; Regulation; Vertical integration; L22; L51;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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