Publication details

Access price regulation and investment incentives

Authors

STANĚK Rostislav

Year of publication 2013
Type Article in Proceedings
Conference Proceedings of the 31st International Conference Mathematical Methods in Economics 2013
MU Faculty or unit

Faculty of Economics and Administration

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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