Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence

51 Pages Posted: 31 Jul 2012 Last revised: 25 Oct 2016

See all articles by Jan Kraemer

Jan Kraemer

University of Passau

Ingo Vogelsang

Boston University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: October 24, 2016

Abstract

Several regulatory authorities have recently allowed competing network operators to co-invest in network infrastructure. With the use of a laboratory experiment, we investigate the impact of co-investments on competition in regulated network industries, particularly in comparison to unilateral and duplicate investments. Our main finding is that co-investment (i.e., cooperation at the infrastructure level) facilitates tacit collusion (i.e., cooperation at the retail level) significantly, which questions the positive evaluation of co-investments with respect to consumers’ surplus in the theoretical literature.

Keywords: experimental economics, network industries, co-investment, tacit collusion, regulation

JEL Classification: C92, L13, L50, L97

Suggested Citation

Kraemer, Jan and Vogelsang, Ingo, Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence (October 24, 2016). Available at SSRN: https://ssrn.com/abstract=2119927 or http://dx.doi.org/10.2139/ssrn.2119927

Jan Kraemer (Contact Author)

University of Passau ( email )

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Ingo Vogelsang

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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