Volume 13, Issue 1

We study service fee and network size competition in an ATM market between an incumbent and an independent deployer, and its optimal regulation. We also analyze an actual regulation of such a market by competition authorities in Finland. Compared with the first-best regulation, we find unregulated foreign and interchange fees too high and an unregulated size of the incumbent’s ATM network too small. However, if network sizes cannot be directly regulated, then competitive fees may also be too low from the welfare point of view. The Finnish regulation caps the incumbent’s foreign fee which, according to our model, results in an increased interchange fee and a larger ATM network. In contrast with the actual regulation, it would also be essential to regulate the interchange fee.

The aim of this paper is to provide deeper insights into the impact of regulatory reforms and privatization on the R&D spending of electricity utilities. Building on a novel panel data set including the biggest European utilities from eight EU countries over a period from 1985 to 2010, we find that the overall influence of the European regulatory reform process on R&D investment is ambiguous. The empirical evidence indicates that the approaching liberalization process, i.e., nearing competition, has a dampening effect on R&D spending. Utilities reduce their expenses due to increased uncertainties and additional risks. However, once the market and regulatory framework conditions have been set up and firms have become used to the new situation, higher levels of competition positively influence R&D and former incumbents invest more in order to “escape” from the competition. Moreover, we find no indication that (ownership) unbundling and incentive regulation directly affect the research expenditures of the utilities. In contrast, the privatization of utilities seems to have strong negative consequences for their amount of R&D spending.

We consider a monopoly that sets a price and differentiated referral fees to spread product information along a simple consumer communication network (a chain). The profit-maximizing solution involves standard monopoly pricing and referral fees that provide consumers with strictly positive referral incentives. Effective price discrimination among consumers based on their positions in the chain occurs both in the case of differentiated referral fees and in the case of uniform referral fees.

Broadband has become ubiquitous across OECD countries, yet because it is typically sold as part of a bundle of services, each with its own set of options, little research has explored how it is priced. In this paper we assemble a new dataset of more than 25,000 residential and business broadband plans from all OECD countries from 2007 to 2009 to explore how data metering, service contracts, and bundling voice, video, and data affect the prices consumers pay. We find that faster speeds are correlated with higher prices, although prices increase at a decreasing rate as speeds increase. Additionally, bundles including voice and video are more expensive than standalone service, and plans with more channels included in video bundles are more expensive than plans with fewer channels. Finally, the analysis shows tradeoffs consumers and suppliers make: plans with data caps are less expensive than those without caps and plans with contracts are less expensive than month-to-month plans.