New Networks, Competition and Regulation

Pio Baake and Ulrich Kamecke

No 568, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We consider a model with two firms operating their individual networks. Each firm can choose its price as well as its investment to build up its network. Assuming a skewed distribution of consumers, our model leads to an asymmetric market structure with one firm choosing higher investments. While access regulation imposed on the dominant firm leads to lower prices, positive welfare effects are diminished by strategic investment decisions of the firms. Within a dynamic game with indirect network effects leading to potentially increased demand, regulation can substantially lower aggregate social welfare. Conditional access holidays can alleviate regulatory failure.

Keywords: Regulation; network effects; natural monopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2006
New Economics Papers: this item is included in nep-com, nep-cse, nep-mic, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.44140.de/dp568.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp568

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().