‪Ouverture à la concurrence et obligations de service universel ‪

Bernard Franck, Nicolas Le Pape and Kadohognon Ouattara

Revue d'économie industrielle, 2014, vol. n° 147, issue 3, 87-109

Abstract: ?This article examines the influence of a private entrant? nationality upon its choice of market penetration when the incumbent (state-owned firm) is in charge of the Universal Service Obligations. ? We compare the area of coverage freely chosen by each type of entrant to those that would prevail when imposed by regulatory authorities. We also examine the impact of the choice of market coverage on quality and price of the services provided by the two firms. When the entrant is a foreign firm, the incumbent adopts marginal cost pricing. By contrast, when the entrant is a domestic firm, the public firm is less aggressive and fixes its price above its marginal cost. This results from the fact that social welfare does not include the entrant?s profit when the latter is a foreign firm. We also show that the quality gap between incumbent and entrant decreases when the coverage area of the entrant is reduced, regardless of the nationality of the entrant. Finally, the optimal level of market coverage imposed by a regulator is always lower than the market coverage that would be freely chosen by the entrant. This latter result may be explained by the fact that an entrant tries to escape from of the deepening competition resulting from a decrease in the quality differential.

Keywords: Universal Service; Liberalization; Optimal Area of Market Coverage; Mixed Duopoly (search for similar items in EconPapers)
Date: 2014
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