Abstract
This paper compares two specific types of competition schemes—service-based and facility-based competition—by focusing on a firm’s incentive to invest in network infrastructure. We show that when monopoly rent is large, facility-based competition means that the initial introduction of infrastructure is made earlier than under service-based competition. However, when monopoly rent and the degree of uncertainty are both small, service-based competition brings about the earlier initial introduction of infrastructure than facility-based competition. The paper includes discussion of the policy implications of these findings.
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Hori, K., Mizuno, K. Competition schemes and investment in network infrastructure under uncertainty. J Regul Econ 35, 179–200 (2009). https://doi.org/10.1007/s11149-008-9075-y
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DOI: https://doi.org/10.1007/s11149-008-9075-y