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Title:Co-investments and tacit collusion in regulated network industries: Experimental evidence PDF Logo
Authors:Krämer, Jan
Vogelsang, Ingo
Issue Date:2012
Series/Report no.:23rd European Regional Conference of the International Telecommunication Society, Vienna, Austria, 1-4 July 2012
Abstract:With the use of a laboratory experiment, we show the effects of co-investments on coverage, competition and price collusion in regulated network industries. On the one hand, co-investments turn out not to be a significant driver of new infrastructure investments beyond the level achieved by access regulation and they seem to facilitate tacit price collusion. On the other hand, co-investments economize on infrastructure investment costs and necessitate communication, which partially offset the aforementioned effects. In fact, communication between the firms on their future coverage, especially outside co-investments, seems to have a positive effect on investments. However, the surprising message of the experiment is that tacit collusion happens under co-investment although there is no reason to believe that it should and although we made almost every effort to prevent it. Our results indicate that regulators should evaluate co-investments with scrutiny as there are definite drawbacks that must be considered.
Subjects:experimental economics
network industries
co-investment
collusion
regulation
JEL:C92
L13
L50
L97
Document Type:Conference Paper
Appears in Collections:23rd European Regional ITS Conference, Vienna 2012

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