Managerial incentives and access price regulation

Authors: Foros, Øystein¹; Kind, Hans²; Sørgard, Lars³

Source: European Journal of Law and Economics, Volume 23, Number 2, April 2007 , pp. 117-133(17)

Publisher: Springer

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Abstract:

Policy makers have identified the non-discrimination principle as a key instrument to regulate vertically integrated firms in control of upstream bottlenecks. It has been argued that the non-discrimination principle may create a level playing field, but at the expense of higher consumer prices. However, this rests on the assumption that the firms do not respond strategically to the regulation. We show that a non-discrimination requirement makes the vertically integrated firm behave more aggressively. Consequently, non-discrimination regulation rarely creates a level playing field. Neither does it necessarily increase end-user prices. Indeed, we show that end-user prices may fall.

Keywords: Telecommunications; Competition; Access pricing; L11; L13; L96

Document Type: Research article

DOI: http://dx.doi.org/10.1007/s10657-007-9012-z

Affiliations: 1: Email: oystein.foros@nhh.no 2: Email: hans.kind@nhh.no 3: Email: laso@kt.no

Publication date: 2007-04-01