Access price regulation and investment incentives
| Authors | |
|---|---|
| Year of publication | 2013 |
| Type | Article in Proceedings |
| Conference | Proceedings of the 31st International Conference Mathematical Methods in Economics 2013 |
| MU Faculty or unit | |
| Citation | |
| Web | https://mme2013.vspj.cz/about-conference/conference-proceedings |
| Field | Economy |
| Keywords | infrastructure investment; access price regulation |
| Description | The paper provides a model of an industry with a vertically integrated infrastructure provider that has a possibility to invest into qualityupgrading infrastructure technology. The investment increases consumer’s willingness to pay. The paper examines investment incentives and welfare implication of access price regulation without the possibility of ex-ante commitment. Regulation with imperfect information is considered as well as regulation with perfect information. The model shows that regulation causes underinvestment in both cases. The imperfect information model has only pooling equilibria which makes the underinvestment problem more severe. The regulation increases welfare only if the marginal investment costs are high enough and the degree of information asymmetry is low enough. |
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