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Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?

Author

Listed:
  • Stefan Buehler

    (Socioeconomic Institute, University of Zurich)

  • Armin Schmutzler

    (Socioeconomic Institute, University of Zurich)

  • Men-Andri Benz

    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

We investigate how various institutional settings affect a network provider�s incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counter-examples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration.

Suggested Citation

  • Stefan Buehler & Armin Schmutzler & Men-Andri Benz, 2002. "Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?," SOI - Working Papers 0209, Socioeconomic Institute - University of Zurich.
    • Handle: RePEc:soz:wpaper:0209
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    investment incentives; networks; quality; vertical externality.;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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