Deregulating Network Industries: Dealing with Price-quality Tradeoffs

Stefan Buehler, Dennis Gärtner () and Daniel Halbheer

Journal of Regulatory Economics, 2006, vol. 30, issue 1, 99-115

Abstract: This paper examines the effects of introducing competition into monopolized network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we first show that deregulating an integrated monopoly cannot simultaneously decrease the retail price and increase infrastructure quality. Second, we derive conditions under which reducing both retail price and infrastructure quality relative to the integrated monopoly outcome increases welfare. Third, we argue that restructuring and setting very low access charges may yield welfare losses, as infrastructure investment is undermined. We provide an extensive analysis of the linear demand model and discuss policy implications. Copyright Springer Science+Business Media, LLC 2006

Keywords: Infrastructure quality; Deregulation; Investment incentives; Access charges; Regulation; D43; L434 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (17)

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Working Paper: Deregulating Network Industries: Dealing with Price-Quality Tradeoffs (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:regeco:v:30:y:2006:i:1:p:99-115

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DOI: 10.1007/s11149-006-0011-8

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