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Political economy of the access pricing problem

Subject

Economics

Publishing details

Regulation Initiative Working Paper Series

Publication Year

2000

Abstract

This paper extends a basic 'common agency' model of policy determination to a case of a policy vector where lobbies have opposed interests in one of the instrucments. Liberalization takes the form of an entrant that has to access the incumbent's network, while the incumbent remains vertically intergrated. In a political equilibrium the access charge for the use of the network tends to be below the optimal access charge, for a fixed level of final prices. Conditions are shown under which the gains from trade in the relationship between lobbies and parties are captured by the politicans, and the choice of instruments is biased towards inefficient ones. Moveover, efficient investment levels are no longer sustainable through capture.

Publication Research Centre

Regulation Initiative (closed)

Series Number

39

Series

Regulation Initiative Working Paper Series

Available on ECCH

No


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