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Access pricing, quality degradation, and foreclosure in the Internet

Foros, Øystein; Kind, Hans Jarle; Sørgard, Lars
Working paper
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URI
http://hdl.handle.net/11250/162964
Date
2001-03
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  • Discussion papers (SAM) [579]
Abstract
Access to both a local and a global network is needed in order to get complete connection to the Internet. The purpose of this article is to examine the interplay between those two networks and how it affects the domestic public policy towards a domestic provider of local access. We find that a cost-oriented regulation is detrimental to domestic welfare, because it shifts profit to the foreign provider of global access. The optimal policy is that the regulator commits itself to set an access price above costs, possibly the same price as in an unregulated market economy. A regulation of the global access price has a non-monotonic effect on domestic welfare, and there is a potential conflict between international and domestic regulation policy.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2001:3

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