Should Uniform Pricing Contraints be Imposed on Entrants?

Steffen Hoernig

No 5052, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyses the effects of universal service obligations, such as uniform pricing, coverage constraints and price caps, on markets newly opened to competition, e.g. broadband services. We show that the requirement of uniform pricing has strong repercussions on coverage decisions. Imposed on the incumbent only, it may distort his coverage decision downward to avoid duopoly entry. If also imposed on entrants it increases the likelihood that entry leads to independent monopolies rather than competition. A large enough coverage constraint on the incumbent re-establishes incentives for duopoly entry, but may lead to higher prices.

Keywords: Universal service obligations; Uniform pricing; Coverage constraints; price caps; Entry (search for similar items in EconPapers)
JEL-codes: L43 L51 L52 (search for similar items in EconPapers)
Date: 2005-05
New Economics Papers: this item is included in nep-com and nep-ind
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Related works:
Journal Article: Should uniform pricing constraints be imposed on entrants? (2006)
Working Paper: Should uniform pricing constraints be imposed on entrants? (2002)
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