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Infrastructure quality in deregulated industries: is there an underinvestment problem?


Buehler, Stefan; Schmutzler, Armin; Benz, Men-Andri (2004). Infrastructure quality in deregulated industries: is there an underinvestment problem? International Journal of Industrial Organization, 22(2):253-267.

Abstract

We investigate how various institutional settings affect a network provider's incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counterexamples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration.

We investigate how various institutional settings affect a network provider's incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide counterexamples. The introduction of downstream competition for the market can sometimes improve incentives. With suitable non-linear access prices investment incentives under separation become identical to those under integration.

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19 citations in Web of Science®
30 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2004
Deposited On:11 Feb 2008 12:21
Last Modified:05 Apr 2016 12:17
Publisher:Elsevier
ISSN:0167-7187
Publisher DOI:10.1016/j.ijindorg.2003.07.004
Permanent URL: http://doi.org/10.5167/uzh-1164

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