Infrastructure Upgrades and Foreclosure with Coexistence of Service-Based and Facility-Based Firms

Noriaki Matsushima and Keizo Mizuno

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We investigate the incentives for facility-based firms to invest in infrastructure upgrades and to foreclose service-based firms. We focus on asymmetric regulation regarding service-based firms' access to the infrastructure held by a facility-based firm. Spillovers from the infrastructure upgrades made by a regulated facility-based firm on service-based firms play a key role in the incentives for making these upgrades. The spillover effect can enhance the incentives for the regulated facility-based firm to make upgrades if access prices are not regulated. The existence of rival facility-based firms strengthens the incentives for a regulated facility-based firm to make infrastructure upgrades, especially when the spillover effect is significant. Furthermore, if access prices are not regulated, the existence of rival facility-based firms weakens the incentives for a regulated facility-based firm to foreclose service-based firms.

Date: 2012-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-reg and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0860

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