Deregulating Network Industries: Dealing with Price-Quality Tradeoffs

Stefan Buehler, Dennis Gaertner () and Daniel Halbheer
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Dennis Gaertner: Socioeconomic Institute, University of Zurich
Authors registered in the RePEc Author Service: Dennis L. Gärtner ()

No 402, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: This paper examines the e�ects of introducing competition into monopolized network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we �rst 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.

Keywords: infrastructure quality; deregulation; investment incentives; access charges; regulation (search for similar items in EconPapers)
JEL-codes: D43 L43 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-01, Revised 2005-10
New Economics Papers: this item is included in nep-com, nep-ene, nep-mic, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Regulatory Economics 30(1), 99-115, 2006

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https://www.econ.uzh.ch/apps/workingpapers/wp/wp0402.pdf Revised version, 2005 (application/pdf)

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Journal Article: Deregulating Network Industries: Dealing with Price-quality Tradeoffs (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0402

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