Should uniform pricing constraints be imposed on entrants?

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Abstract

This paper analyzes uniform pricing, coverage constraints and price caps in markets newly opened to competition, e.g. broadband services. We show that the requirement of uniform pricing has strong repercussions on coverage decisions. Imposed on incumbents only it may distort their coverage decision downward to avoid duopoly entry. If also imposed on entrants it increases the likelihood that entry leads to independent monopolies rather than competition. A sufficiently large coverage constraint on incumbents reestablishes incentives for duopoly entry, but may lead to higher prices.

Original languageEnglish
Pages (from-to)199-216
Number of pages18
JournalJournal Of Regulatory Economics
Volume30
Issue number2
DOIs
Publication statusPublished - Aug 2006

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Keywords

  • Coverage constraints
  • Entry
  • Price caps
  • Uniform pricing

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