Co-investment deterrence

Ángel L. López, Anton-Giulio Manganelli and María Martín-Rodríguez

Economics Letters, 2022, vol. 211, issue C

Abstract: We examine co-investment and access in a model of new network deployment. We show that the incumbent firm may find it optimal to deter co-investment by over-investing when the cost-sharing rule is based on its verified expenditure and the information on the deployment cost is asymmetric between the operators and the regulator. When partial deterrence is optimal, it occurs in the areas of intermediate attractiveness, consistently with the evidence found in other industries. A necessary and sufficient condition for deterrence to occur is that local industry profits are lower with than without co-investment. Results are robust to demand uncertainty.

Keywords: Access; Co-investment; Deterrence; Over-investments (search for similar items in EconPapers)
JEL-codes: L51 L96 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:211:y:2022:i:c:s0165176521004900

DOI: 10.1016/j.econlet.2021.110263

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