Level of Access and Infrastructure Investment in Network Industries

23 Pages Posted: 13 Jun 2013

See all articles by Marc Bourreau

Marc Bourreau

Telecom ParisTech

Pinar Dogan

Harvard University - Harvard Kennedy School (HKS)

Romain Lestage

Central University of Finance and Economics

Date Written: June 07, 2013

Abstract

In this paper we study the effect of the terms of access to an incumbent's infrastructure on an entrant's incentives to build its own infrastructure. Setting a high level of access (e.g., a resale arrangement), which requires relatively small up-front investment for entry, accelerates market entry, but at the same time delays the deployment of the entrant's infrastructure. This is also true for a lower access price set for a given access level. We show that the socially optimal access price can vary non-monotonically with the level of access. We also consider two levels of access, and show that providing the entrant with multiple levels of access delays infrastructure building.

Keywords: Level of access, Infrastructure investment, Network industries

JEL Classification: L1, L5, L9

Suggested Citation

Bourreau, Marc and Dogan, Pinar and Lestage, Romain, Level of Access and Infrastructure Investment in Network Industries (June 07, 2013). Available at SSRN: https://ssrn.com/abstract=2278513 or http://dx.doi.org/10.2139/ssrn.2278513

Marc Bourreau (Contact Author)

Telecom ParisTech ( email )

46, rue Barrault
Paris Cedex 13, F-75634
France

Pinar Dogan

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-6757 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://scholar.harvard.edu/pdogan/home

Romain Lestage

Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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