Strategic Investments under Open Access: Theory and Evidence

Tilman Klumpp () and Xuejuan Su

No 2013-2, Working Papers from University of Alberta, Department of Economics

Abstract: We examine the incentives of access-regulated firms to invest in infrastructure facilities they must share with competitors. The non-strategic incentives imply that investment depends positively on the market size. The strategic incentives imply that investment also depends on market composition, namely, the market shares of the facility owner and its competitors. Using a dataset of regulated electric utilities in the United States, we find evidence that transmission investments are indeed made strategically. Ceteris paribus, utilities are less likely to invest, and investment levels are lower, when competitors occupy a larger share of the market.

Keywords: infrastructure investment; network industries; open access; access regulation; electricity wholesale market (search for similar items in EconPapers)
JEL-codes: D21 D22 D43 K23 L43 L94 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-01-01
New Economics Papers: this item is included in nep-cdm, nep-com, nep-ene, nep-ind and nep-reg
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Journal Article: Strategic Investment under Open Access: Theory and Evidence (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2013_002

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