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Journal Articles Journal of Regulatory Economics Year : 2014

Progressive entry and the incentives to invest in alternative infrastructures

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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.
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Dates and versions

hal-01016366 , version 1 (30-06-2014)

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Marc Bourreau, Joeffrey Drouard. Progressive entry and the incentives to invest in alternative infrastructures. Journal of Regulatory Economics, 2014, 45 (3), pp.329-351. ⟨10.1007/s11149-014-9248-9⟩. ⟨hal-01016366⟩
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