Abstract

http://ssrn.com/abstract=1791568
 
 

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Regulation of Network Infrastructure Investments: An Experimental Evaluation


Bastian Henze


Tilburg University - Department of Economics - CentER & TILEC

Charles N. Noussair


Tilburg University

Bert Willems


Tilburg University - Department of Economics - CentER & TILEC

March 21, 2011

TILEC Discussion Paper No. 2011-019
CentER Discussion Paper No. 2011-035

Abstract:     
This paper reports the results of an experiment evaluating three regulatory schemes for network infrastructure, in terms of their ability to generate efficient levels of capacity investment. We compare the performance of (1) price cap regulation, (2) a regulatory holiday for new capacity, and (3) price cap regulation with long term contracts combined with a secondary market. We find that the price cap regulation outperforms the regulatory holiday as the latter creates an incentive to underinvest relative to optimal levels. Long term contracts also fail to improve on single price-cap regulation, and can provide more noisy signals about future demand and thus reduce investment.

Number of Pages in PDF File: 38

Keywords: Infrastructure Investment, Experiment, Price Cap, Regulatory Holiday

JEL Classification: C9, L51, L95

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Date posted: March 25, 2011 ; Last revised: March 31, 2011

Suggested Citation

Henze, Bastian and Noussair, Charles N. and Willems, Bert, Regulation of Network Infrastructure Investments: An Experimental Evaluation (March 21, 2011). TILEC Discussion Paper No. 2011-019. Available at SSRN: http://ssrn.com/abstract=1791568 or http://dx.doi.org/10.2139/ssrn.1791568

Contact Information

Bastian Henze (Contact Author)
Tilburg University - Department of Economics - CentER & TILEC ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Charles N. Noussair
Tilburg University ( email )
P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands
Bert Willems
Tilburg University - Department of Economics - CentER & TILEC ( email )
P.O. Box 90153 Room K308
Tilburg, 5000LE
Netherlands
+31134662588 (Phone)
HOME PAGE: http://www.bertwillems.com
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