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Co-investments and tacit collusion in regulated network industries: Experimental evidence

Jan Krämer and Ingo Vogelsang
Authors registered in the RePEc Author Service: Jan Krämer ()

23rd European Regional ITS Conference, Vienna 2012 from International Telecommunications Society (ITS)

Abstract: With the use of a laboratory experiment, we show the effects of co-investments on coverage, competition and price collusion in regulated network industries. On the one hand, co-investments turn out not to be a significant driver of new infrastructure investments beyond the level achieved by access regulation and they seem to facilitate tacit price collusion. On the other hand, co-investments economize on infrastructure investment costs and necessitate communication, which partially offset the aforementioned effects. In fact, communication between the firms on their future coverage, especially outside co-investments, seems to have a positive effect on investments. However, the surprising message of the experiment is that tacit collusion happens under co-investment although there is no reason to believe that it should and although we made almost every effort to prevent it. Our results indicate that regulators should evaluate co-investments with scrutiny as there are definite drawbacks that must be considered.

Keywords: experimental economics; network industries; co-investment; collusion; regulation (search for similar items in EconPapers)
JEL-codes: C92 L13 L50 L97 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
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Journal Article: Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence (2016) Downloads
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