Access Pricing: Theory and Practice by Ralf Dewenter, Justus Haucap

By Ralf Dewenter, Justus Haucap

Entry to crucial amenities or so-called bottlenecks has turn into the foremost public coverage factor for the liberalization of community industries equivalent to telecommunications, electrical energy, rail etc. nonetheless, entry costs aren't purely vital for pageant in previously monopolistic industries, but additionally for industries the place festival has lengthy been validated equivalent to check and bank card networks or cellular telecommunications. because the latter industries have additionally come below nearer scrutiny through regulatory enterprises and festival experts, this ebook is devoted to the research of entry pricing in thought and perform. The constitution of this ebook that is equipped in 5 elements is as follows: The prolonged creation will introduce the most important strategies and matters together with a short rationalization of the basic facility suggestion in addition to the excellence among one-way and two-way entry and may in short survey the most contributions in the literature on entry pricing concept and perform. whereas components I and II take care of the speculation of one-way and two-way entry pricing, respectively, half III makes a speciality of the newly rising conception of entry pricing with multihoming. components IV and V deal with the perform facet and concentrate on industry-specific functions and targeted difficulties (Part IV) in addition to public coverage matters (Part V). This e-book offers worthy theoretical and empirical analyses in entry Pricing and similar themes. It bargains numerous assorted issues of view. It beneficial properties examine from hugely reputed scientists operating during this box.

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The market, therefore, consists of two segments, with the first being competitive and the second characterized by captive customers. As a consequence, market shares are no longer neutral to price changes and, accordingly, the non-integrated firm’s profits are no longer neutral with respect to the access price. As the authors show, for relatively low levels of the captured customers’ demand elasticity, a relatively small change in the access price may still result in a relatively large change in the retail price.

From a public policy point of view, this might actually lead to overinvestment and ‘unnecessary’ duplication of parts of a given network. Apart from guaranteeing productive efficiency, the ECPR has a second major advantage: the informational requirements it imposes on regulatory authorities are comparatively low. Basically, the ECP is the price at which an incumbent would grant access to its network on a voluntary basis. If the incumbent is reimbursed for any monopoly profit lost, the monopoly firm will be indifferent between granting access to rivals and selling retail services to customers.

Since high access charges can prevent entry even if the newcomer is more efficient than the incumbent, the regulator has to choose an optimum access charge level and structure. As Axel Gautier shows, a two-part tariff should be chosen if the incumbent operates at a high cost, while a linear tariff should be chosen if the incumbent is rather efficient (and its production cost low). Chapter 1 – Access Pricing: An Introduction 21 In a game where the regulator first designs a regulatory contract including either a two-part or a single part tariff, before the newcomer learns its costs and decides on entry in the second stage and, finally, the incumbent (behaving as a Stackelberg leader) and the entrant decide on their quantities, Axel Gautier demonstrates that full efficiency (the first best) can neither be reached under a single- nor under a two-part tariff.

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