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Quality Provision in Deregulated Industries: The Railtrack Problem


Benz, Men-Andri; Buehler, Stefan; Schmutzler, Armin (2000). Quality Provision in Deregulated Industries: The Railtrack Problem. Working paper series / Socioeconomic Institute No. 2, University of Zurich.

Abstract

This paper studies a network provider's incentives to invest in infrastructure quality. In a simple but general framework, we investigate how various institutional settings affect investment incentives. We show that under reasonable assumptions on demand, investment incentives are smaller under vertical separation than under vertical integration. We consider two strategies for improving investment incentives under vertical separation. First, the introduction of competition for the market can sometimes improve incentives. Second, with non-linear access prices investment incentives under separation become identical to those under integration.

Abstract

This paper studies a network provider's incentives to invest in infrastructure quality. In a simple but general framework, we investigate how various institutional settings affect investment incentives. We show that under reasonable assumptions on demand, investment incentives are smaller under vertical separation than under vertical integration. We consider two strategies for improving investment incentives under vertical separation. First, the introduction of competition for the market can sometimes improve incentives. Second, with non-linear access prices investment incentives under separation become identical to those under integration.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Socioeconomic Institute (former)
Dewey Decimal Classification:330 Economics
JEL Classification:D42, L22, L43, L92
Language:English
Date:June 2000
Deposited On:29 Nov 2011 22:32
Last Modified:07 Dec 2017 10:11
Series Name:Working paper series / Socioeconomic Institute
Official URL:http://www.econ.uzh.ch/wp.html

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