Progressive entry and the incentives to invest in alternative infrastructures

Marc Bourreau and Joeffrey Drouard ()

Abstract: In this paper we study an entrant's incentives to build a network infrastructure, when there is an initial phase of service-based competition where it leases access to the incumbent's infrastructure. We build a model in which the phase of service-based competition allows the entrant to step into the market by progressively acquiring market experience. We show that the acquisition of experience in the phase of service-based competition delays the entrant's investment when the prospects for infrastructure investment are good, and accelerates investment otherwise. We also show that when the acquisition of experience depends on the entrant's current customer base and facility-based entry is a long-term possibility, setting a low access price can accelerate the entrant's investment.

Keywords: Entry; Infrastructure investment; Access pricing; Telecommunications (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-com
Note: View the original document on HAL open archive server: https://univ-rennes.hal.science/hal-01016366v1
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Published in Journal of Regulatory Economics, 2014, 45 (3), pp.329-351. ⟨10.1007/s11149-014-9248-9⟩

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Journal Article: Progressive entry and the incentives to invest in alternative infrastructures (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01016366

DOI: 10.1007/s11149-014-9248-9

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