Regulation and Internet Access in Germany

Michael Reutter

No 480, CESifo Working Paper Series from CESifo

Abstract: We explain the recent events in the German market for online access using a model of a regulated monopoly renting phone lines to retailers. Retailers offer either a linear or a flat tariff to consumers. Consumer heterogeneity leads to adverse selectiion. We show why market entry for flatrate firms is difficult under a linear wholesale tariff. With both a linear and a flat wholesale tariff the consumer market shows a mixture of tariffs as well. When marginal costs are zero it is optimal to have a wholesale flatrate only. However, marginal moves towards this equilibrium are not always welfare improving.

Keywords: Internet; flatrate; adverse selection (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (2)

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