Progressive entry and the incentives to invest in alternative infrastructures

Marc Bourreau and Joeffrey Drouard ()

Journal of Regulatory Economics, 2014, vol. 45, issue 3, 329-351

Abstract: In this paper we study an entrant’s incentives to build a network infrastructure, when there is an initial phase of service-based competition where it leases access to the incumbent’s infrastructure. We build a model in which the phase of service-based competition allows the entrant to step into the market by progressively acquiring market experience. We show that the acquisition of experience in the phase of service-based competition delays the entrant’s investment when the prospects for infrastructure investment are good, and accelerates investment otherwise. We also show that when the acquisition of experience depends on the entrant’s current customer base and facility-based entry is a long-term possibility, setting a low access price can accelerate the entrant’s investment. Copyright Springer Science+Business Media New York 2014

Keywords: Entry; Infrastructure investment; Access pricing; Telecommunications; L51; L96 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (10)

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Working Paper: Progressive entry and the incentives to invest in alternative infrastructures (2014)
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DOI: 10.1007/s11149-014-9248-9

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