Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks

Naoaki Minamihashi

Staff Working Papers from Bank of Canada

Abstract: Can regulation solve problems arising from a natural monopoly? This paper analyzes whether “unbundling,” referring to regulations that enforce sharing of natural monopolistic infrastructure, prevents entrants from building new infrastructure. It models and estimates a dynamic entry game to evaluate the effects of regulation, using a dataset for construction of fiber-optic networks in Japan. The counterfactual exercise shows that forced unbundling regulation leads to a 24% decrease in the incidence of new infrastructure builders. This suggests, therefore, that when a new technology is being diffused, regulation to remove a natural monopoly conversely involves risks that regulated monopolists’ shares will increase.

Keywords: Market structure and pricing; Productivity (search for similar items in EconPapers)
JEL-codes: K23 L43 L96 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2012
New Economics Papers: this item is included in nep-com and nep-ind
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:12-26

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