DP9376 Cooperative Investment, Uncertainty and Access

Author(s): Marc Bourreau, Carlo Cambini, Steffen Hoernig
Publication Date: March 2013
Keyword(s): Access Obligations, Co-investment, Networks, Uncertainty
JEL(s): D21, D43, G31, L5, L96
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9376

We investigate cooperative investment for the deployment of a new infrastructure, and how it interacts with access obligations and demand uncertainty. Co-investment increases total coverage only if service differentiation and/or cost savings from joint investment, in particular due to high uncertainty, are high. Mandated access reduces incentives for co-investment not only through lower returns but also by the existence of the access option itself. Voluntary access provision increases infrastructure coverage but reduces social welfare by softening competition.