Should Uniform Pricing Constraints Be Imposed on Entrants?

FEUNL Working Paper No. 417

27 Pages Posted: 14 Feb 2006

See all articles by Steffen Hoernig

Steffen Hoernig

Nova School of Business and Economics

Date Written: 2002

Abstract

We analyse the effects of universal service obligations, such as uniform pricing, price caps and unbundling, on allocations in markets newly opened to competition, e.g. telecommunications. If uniform pricing is imposed not only on incumbents but also on entrants, entry may not result in competition if installed capacity is low, or may neglect high-cost areas if installed capacity or mandated coverage is high. These results hold no matter whether a price cap is in place or not, and do not depend on whether entry is capacity-based or facilitated through unbundling.

Keywords: Universal Service Obligations, Uniform Pricing, Price caps, Unbundling, Entry

JEL Classification: L43, L51, L52

Suggested Citation

Hoernig, Steffen, Should Uniform Pricing Constraints Be Imposed on Entrants? (2002). FEUNL Working Paper No. 417, Available at SSRN: https://ssrn.com/abstract=882033 or http://dx.doi.org/10.2139/ssrn.882033

Steffen Hoernig (Contact Author)

Nova School of Business and Economics ( email )

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Carcavelos, 2775-405
Portugal
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