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Can two-part tariffs promote efficient investment on next generation networks?

Duarte Brito, Pedro Pereira and João Vareda ()

International Journal of Industrial Organization, 2010, vol. 28, issue 3, 323-333

Abstract: We analyze if two-part access tariffs solve the dynamic consistency problem of the regulation of next generation networks. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a next generation network that improves the quality of the retail services. We have three main results. First, we show that if the regulator can commit to a policy, a regulatory moratorium may emerge as socially optimal. Second, we show that if the regulator cannot commit to a policy, it can induce investment only when the investment cost is low. Third, we show that in this case, two-part tariffs involve very large payments from the entrant to the incumbent.

Keywords: Next; generation; networks; Investment; Regulation; Dynamic; consistency (search for similar items in EconPapers)
Date: 2010
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Working Paper: Can Two-Part Tariffs Promote Efficient Investment on Next Generation Networks? (2008) Downloads
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