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Journal of Regulatory Economics

, Volume 30, Issue 1, pp 99–115 | Cite as

Deregulating Network Industries: Dealing with Price-quality Tradeoffs

  • Stefan Buehler
  • Dennis Gärtner
  • Daniel Halbheer
Oringinal Article

Abstract

This paper examines the effects of introducing competition into monopolized network industries on prices and infrastructure quality. Analyzing a model with reduced-form demand, we first show that deregulating an integrated monopoly cannot simultaneously decrease the retail price and increase infrastructure quality. Second, we derive conditions under which reducing both retail price and infrastructure quality relative to the integrated monopoly outcome increases welfare. Third, we argue that restructuring and setting very low access charges may yield welfare losses, as infrastructure investment is undermined. We provide an extensive analysis of the linear demand model and discuss policy implications.

Keywords

Infrastructure quality Deregulation Investment incentives Access charges Regulation 

JEL Classification

D43 L434 

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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Stefan Buehler
    • 1
    • 2
  • Dennis Gärtner
    • 1
    • 2
  • Daniel Halbheer
    • 1
    • 2
  1. 1.Socioeconomic Institute, University of ZurichZurichSwitzerland
  2. 2.Research Institute for Empirical Economics and Economic PolicyUniversity of St. GallenSt. GallenSwitzerland

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