[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/bpj/rneart/v15y2017i1p35-61n2.html
   My bibliography  Save this article

Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence

Author

Listed:
  • Krämer Jan

    (University of Passau, Chair of Internet and Telecommunications Business, Dr-Hans-Kapfinger-Str. 12, 94032 Passau, Germany, Tel.: +49-851-509-2580, Fax: +49-851-509-2592)

  • Vogelsang Ingo

    (Boston University, Department of Economics, 270 Bay State Road, 02215 Boston, MA, USA)

Abstract
Several regulatory authorities have recently allowed competing network operators to co-invest in network infrastructure. With the use of a laboratory experiment, we investigate the impact of co-investments on competition in regulated network industries, particularly in comparison to unilateral and duplicate investments. Our main finding is that co-investment (i.e. cooperation at the infrastructure level) facilitates tacit collusion (i.e. cooperation at the retail level) significantly, which questions the positive evaluation of co-investments with respect to consumers’ surplus in the theoretical literature.

Suggested Citation

  • Krämer Jan & Vogelsang Ingo, 2016. "Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence," Review of Network Economics, De Gruyter, vol. 15(1), pages 35-61, March.
    • Handle: RePEc:bpj:rneart:v:15:y:2017:i:1:p:35-61:n:2
    DOI: 10.1515/rne-2016-0026
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/rne-2016-0026
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/rne-2016-0026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cambini, Carlo & Silvestri, Virginia, 2012. "Technology investment and alternative regulatory regimes with demand uncertainty," Information Economics and Policy, Elsevier, vol. 24(3), pages 212-230.
    2. Steffen Hoernig, 2006. "Should uniform pricing constraints be imposed on entrants?," Journal of Regulatory Economics, Springer, vol. 30(2), pages 199-216, August.
    3. Nitsche, Rainer & Wiethaus, Lars, 2011. "Access regulation and investment in next generation networks -- A ranking of regulatory regimes," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 263-272, March.
    4. Briglauer Wolfgang & Frübing Stefan & Vogelsang Ingo, 2014. "The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure – A Survey," Review of Network Economics, De Gruyter, vol. 13(3), pages 227-270, September.
    5. Christian Rojas, 2012. "The role of demand information and monitoring in tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 78-109, March.
    6. Kyle Hampton & Katerina Sherstyuk, 2012. "Demand shocks, capacity coordination, and industry performance: lessons from an economic laboratory," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 139-166, March.
    7. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, August.
    8. Jan Boone, 2008. "A New Way to Measure Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1245-1261, August.
    9. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
    10. Marc BOURREAU & Carlo CAMBINI & Steffen HOERNIG, 2010. "National FTTH plans in France, Italy and Portugal," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 107-126, 2nd quart.
    11. Hoernig, Steffen & Cambini, Carlo, 2013. "Cooperative Investment, Uncertainty and Access," CEPR Discussion Papers 9376, C.E.P.R. Discussion Papers.
    12. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    13. Tomaso Duso & Lars-Hendrik Röller & Jo Seldeslachts, 2014. "Collusion Through Joint R&D: An Empirical Assessment," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 349-370, May.
    14. Normann, Hans-Theo & Rösch, Jürgen & Schultz, Luis Manuel, 2015. "Do buyer groups facilitate collusion?," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 72-84.
    15. Cason, Timothy N & Mason, Charles F, 1999. "Information Sharing and Tacit Collusion in Laboratory Duopoly Markets," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 258-281, April.
    16. Bourreau, Marc & Cambini, Carlo & Hoernig, Steffen, 2012. "Ex ante regulation and co-investment in the transition to next generation access," Telecommunications Policy, Elsevier, vol. 36(5), pages 399-406.
    17. Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Explicit vs. tacit collusion—The impact of communication in oligopoly experiments," European Economic Review, Elsevier, vol. 56(8), pages 1759-1772.
    18. Degraba, Patrick, 2003. "A Bottleneck Input Supplier's Opportunity Cost of Competing Downstream," Journal of Regulatory Economics, Springer, vol. 23(3), pages 287-297, May.
    19. Sigrid Suetens & Jan Potters, 2007. "Bertrand colludes more than Cournot," Experimental Economics, Springer;Economic Science Association, vol. 10(1), pages 71-77, March.
    20. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    21. Distaso, Walter & Lupi, Paolo & Manenti, Fabio M., 2006. "Platform competition and broadband uptake: Theory and empirical evidence from the European union," Information Economics and Policy, Elsevier, vol. 18(1), pages 87-106, March.
    22. Christoph Engel, 2007. "How Much Collusion? A Meta-Analysis Of Oligopoly Experiments," Journal of Competition Law and Economics, Oxford University Press, vol. 3(4), pages 491-549.
    23. Cambini, Carlo & Jiang, Yanyan, 0. "Broadband investment and regulation: A literature review," Telecommunications Policy, Elsevier, vol. 33(10-11), pages 559-574, November.
    24. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    25. Thomas W. Ross, 2009. "Sustaining Cooperation with Joint Ventures," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(1), pages 31-54, May.
    26. Bastian Henze & Charles Noussair & Bert Willems, 2012. "Regulation of network infrastructure investments: an experimental evaluation," Journal of Regulatory Economics, Springer, vol. 42(1), pages 1-38, August.
    27. Suetens, Sigrid, 2008. "Does R&D cooperation facilitate price collusion? An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 822-836, June.
    28. Cambini, Carlo & Silvestri, Virginia, 2013. "Investment sharing in broadband networks," Telecommunications Policy, Elsevier, vol. 37(10), pages 861-878.
    29. Dobson, Paul W. & Waterson, Michael, 2008. "Chain-Store Competition: Customized vs. Uniform Pricing," Economic Research Papers 269789, University of Warwick - Department of Economics.
    30. Hoernig, Steffen & Jay, Stephan & Neumann, Karl-Heinz & Peitz, Martin & Plückebaum, Thomas & Vogelsang, Ingo, 2012. "The impact of different fibre access network technologies on cost, competition and welfare," Telecommunications Policy, Elsevier, vol. 36(2), pages 96-112.
    31. Mason, Charles F & Phillips, Owen R & Nowell, Clifford, 1992. "Duopoly Behavior in Asymmetric Markets: An Experimental Evaluation," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 662-670, November.
    32. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    33. Horstmann, Niklas & Krämer, Jan, 2013. "Price discrimination or uniform pricing: Which colludes more?," Economics Letters, Elsevier, vol. 120(3), pages 379-383.
    34. Carlo Cambini and Virginia Silvestri, 2012. "Technology Investment and Alternative Regulatory Regimes with Demand Uncertainty," RSCAS Working Papers 2012/15, European University Institute.
    35. Andreas Nicklisch, 2012. "Does collusive advertising facilitate collusive pricing? Evidence from experimental duopolies," European Journal of Law and Economics, Springer, vol. 34(3), pages 515-532, December.
    36. Hans‐Theo Normann & Roberto Ricciuti, 2009. "Laboratory Experiments For Economic Policy Making," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 407-432, July.
    37. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hoernig, Steffen & Cambini, Carlo, 2013. "Cooperative Investment, Uncertainty and Access," CEPR Discussion Papers 9376, C.E.P.R. Discussion Papers.
    2. Briglauer Wolfgang & Frübing Stefan & Vogelsang Ingo, 2014. "The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure – A Survey," Review of Network Economics, De Gruyter, vol. 13(3), pages 227-270, September.
    3. Wisuttisak, Pornchai & Kim, Chul Ju & Rahim, Mia Mahmudur, 2021. "PPPs and challenges for competition law and policy in ASEAN," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 291-306.
    4. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148657, International Telecommunications Society (ITS).
    5. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148656, International Telecommunications Society (ITS).
    6. Balmer, Roberto E., 2015. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 26th European Regional ITS Conference, Madrid 2015 127125, International Telecommunications Society (ITS).
    7. Balmer, Roberto E., 2014. "Geographic regulation and cooperative investment in next generation broadband networks," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106889, International Telecommunications Society (ITS).
    8. Cojoc, Anca & Ivaldi, Marc & Maier-Rigaud, Frank P. & März, Oliver, 2020. "Horizontal cooperation on investment: Evidence from mobile network sharing," TSE Working Papers 20-1100, Toulouse School of Economics (TSE).
    9. Vogelsang, Ingo, 2019. "Has Europe missed the endgame of telecommunications policy?," Telecommunications Policy, Elsevier, vol. 43(1), pages 1-10.
    10. Cambini, Carlo & Silvestri, Virginia, 2013. "Investment sharing in broadband networks," Telecommunications Policy, Elsevier, vol. 37(10), pages 861-878.
    11. Balmer, Roberto E., 2015. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 26th European Regional ITS Conference, Madrid 2015 127124, International Telecommunications Society (ITS).
    12. Bourreau, Marc & Lestagey, Romain, 2018. "Access and Cooperative Investment under Asymmetric Infrastructure Competition," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190375, International Telecommunications Society (ITS).
    13. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148657, International Telecommunications Society (ITS).
    2. Balmer, Roberto E., 2014. "Geographic regulation and cooperative investment in next generation broadband networks," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106889, International Telecommunications Society (ITS).
    3. Balmera, Roberto E. & Ünverb, Mehmet Bilal, 2016. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 27th European Regional ITS Conference, Cambridge (UK) 2016 148656, International Telecommunications Society (ITS).
    4. Balmer, Roberto E., 2015. "Geographic regulation of next generation broadband networks: A review of practical cases and recent literature," 26th European Regional ITS Conference, Madrid 2015 127125, International Telecommunications Society (ITS).
    5. Flacher, David & Jennequin, Hugues, 2014. "Access regulation and geographic deployment of a new generation infrastructure," Telecommunications Policy, Elsevier, vol. 38(8), pages 741-759.
    6. Balmer, Roberto, 2013. "Geographic Regulation and Cooperative Investment in Next Generation Broadband Networks - A Review of Recent Literature and Practical Cases," MPRA Paper 54080, University Library of Munich, Germany.
    7. Balmer, Roberto E., 2015. "Cooperative investment in next generation broadband networks: A review of recent practical cases and literature," 26th European Regional ITS Conference, Madrid 2015 127124, International Telecommunications Society (ITS).
    8. Briglauer Wolfgang & Frübing Stefan & Vogelsang Ingo, 2014. "The Impact of Alternative Public Policies on the Deployment of New Communications Infrastructure – A Survey," Review of Network Economics, De Gruyter, vol. 13(3), pages 227-270, September.
    9. Klaus Friesenbichler, 2019. "What Explains Aggregate Telecom Investments? Evidence From an EU-OECD Panel," WIFO Working Papers 583, WIFO.
    10. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, July.
    11. Abrardi, Laura & Cambini, Carlo, 2019. "Ultra-fast broadband investment and adoption: A survey," Telecommunications Policy, Elsevier, vol. 43(3), pages 183-198.
    12. Argenton, Cédric & Ivanova-Stenzel, Radosveta & Müller, Wieland, 2024. "Cournot meets Bayes-Nash: A discontinuity in behavior in finitely repeated duopoly games," Games and Economic Behavior, Elsevier, vol. 144(C), pages 1-12.
    13. Casoria, Fortuna & Ciccone, Alice, 2021. "Do upfront investments increase cooperation? A laboratory experiment," European Economic Review, Elsevier, vol. 140(C).
    14. Briglauer, Wolfgang & Cambini, Carlo & Fetzer, Thomas & Hüschelrath, Kai, 2017. "The European Electronic Communications Code: A critical appraisal with a focus on incentivizing investment in next generation broadband networks," Telecommunications Policy, Elsevier, vol. 41(10), pages 948-961.
    15. Andreas Nicklisch, 2008. "Semi-collusive advertising and pricing in experimental duopolies," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2008_25, Max Planck Institute for Research on Collective Goods.
    16. Cambini, Carlo & Silvestri, Virginia, 2013. "Investment sharing in broadband networks," Telecommunications Policy, Elsevier, vol. 37(10), pages 861-878.
    17. Normann, Hans-Theo & Rösch, Jürgen & Schultz, Luis Manuel, 2015. "Do buyer groups facilitate collusion?," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 72-84.
    18. Parcu, Pier Luigi & Silvestri, Virginia, 2014. "Electronic communications regulation in Europe: An overview of past and future problems," Utilities Policy, Elsevier, vol. 31(C), pages 246-255.
    19. Brito, Duarte & Tselekounis, Markos, 2016. "Access regulation and the entrant's mode of entry under multi-product competition in telecoms," Information Economics and Policy, Elsevier, vol. 37(C), pages 20-33.
    20. Lestage, Romain & Flacher, David, 2014. "Infrastructure investment and optimal access regulation in the different stages of telecommunications market liberalization," Telecommunications Policy, Elsevier, vol. 38(7), pages 569-579.

    More about this item

    Keywords

    co-investment; collusion; experimental economics; network industries; regulation;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rneart:v:15:y:2017:i:1:p:35-61:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.