Working Paper: CEPR ID: DP6203
Authors: Joo Miguel Bastos Vareda; Steffen Hoernig
Abstract: We analyze the impact of mandatory access on the infrastructure investments of two competing communications networks, and show that for low (high) access charges firms wait (preempt each other). Contrary to previous results, under preemption a higher access charge can delay first investment. Constant access tariffs cannot achieve the first best. Optimal time-variant access tariffs may be increasing or decreasing over time. The first-best cannot be achieved at all through access tariff regulation if the follower?s private incentives are dominated by business-stealing. Here access holidays can improve welfare by allowing for lower future access charges, which delay the second investment.
Keywords: access holidays; investments; preemption; time-variant access charges
JEL Codes: D92; L43; L51; L96
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Access charges (L90) | Investment timing (G11) |
| Time-variant access tariffs (L97) | Investment incentives (G31) |
| Access holidays (J22) | Welfare (I38) |
| Access holidays (J22) | Future access charges (L97) |