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Cooperative investment, access, and uncertainty
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1028-3625
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EUI RSCAS; 2016/61; Florence School of Regulation
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BOURREAU, Marc, CAMBINI, Carlo, HOERNIG, Steffen, Cooperative investment, access, and uncertainty, EUI RSCAS, 2016/61, Florence School of Regulation - https://hdl.handle.net/1814/44084
Abstract
This paper compares the impacts of traditional one-way access obligations and the new regulatory scheme of co-investment on the roll-out of network infrastructures. We show that compulsory access leads to smaller roll-out, first because it reduces the returns from investment, and second because in the presence of uncertainty it provides access seekers with an option whose exercise hurts investors. Co-investment without access obligations leads to risk sharing and eliminates the access option, implying highest network coverage. Allowing for access on top of co-investment actually decreases welfare if the access price is low.