 Impact of access regulation on investment reconsideredZhihong Chen and Zhiqi Chen Economic Modelling, 2024, vol. 136, issue C Abstract: In regulated industries like electricity, gas, and telecommunications, regulators often require vertically integrated incumbents to share their infrastructure with competitors in a related market. This paper demonstrates that such access regulation may strengthen an incumbent's incentive to invest in infrastructure even if the regulated access price of an input is set at its marginal cost. Specifically, we reconsider Kotakorpi's (2006) model under an alternative circumstance where downstream rivals would be foreclosed from the market without regulation. We find that the access regulation increases investment and improves social welfare under certain conditions. Our main conclusion is robust to an alternative way of modeling consumers' valuation of products. Furthermore, raising the access price above the marginal cost expands the parameters for which the regulation increases investment. Our analysis suggests that access regulation alone does not reduce an incumbent's investment incentive. Keywords: Access price; Regulation; Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:136:y:2024:i:c:s0264999324000907 DOI: 10.1016/j.econmod.2024.106734 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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