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Strategic investments under competition for access provision

Noriaki Matsushima and Keizo Mizuno

Telecommunications Policy, 2018, vol. 42, issue 2, 127-144

Abstract: We examine competition for access provision when symmetric vertically integrated firms invest in infrastructure upgrades. Spillovers through access have two effects (a wholesale-profit effect and a retail-production effect) on infrastructure investment made by vertically integrated firms. When the vertically integrated firms freely set access charges, due to the dominance of the wholesale-profit effect, quality differentials endogenously occur between these firms (asymmetric equilibria). When access charges are regulated, symmetric equilibria occur with multiple equilibrium investments due to the retail-production effect. Because competition for access provision induces a strong incentive for infrastructure investment, it also achieves a higher social welfare than does access regulation.

Keywords: Access provision; Infrastructure upgrades; Spillovers (search for similar items in EconPapers)
JEL-codes: L43 L51 L96 (search for similar items in EconPapers)
Date: 2018
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