Reference : Strategic bypass deterrence
Scientific journals : Article
Business & economic sciences : Microeconomics
http://hdl.handle.net/2268/146679
Strategic bypass deterrence
English
Bloch, Francis [> >]
Gautier, Axel mailto [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Economie industrielle >]
2017
Journal of Regulatory Economics
Springer Science & Business Media B.V.
52
189-210
Yes (verified by ORBi)
International
0922-680X
1573-0468
[en] Make-or-buy ; Access price ; Bypass
[en] In liberalized network industries, competitors can either compete for service using the existing infrastructure (access) or deploy their own capacity (bypass). We revisit this make-or-buy problem making two contributions to the literature. First we analyze both the profit maximizing behavior of an incumbent and the welfare maximizing behavior when the entrant chooses between access and bypass. Second, we extend the baseline model studied in the literature by allowing for fixed costs of network installation. By analogy to the literature on strategic entry deterrence, we distinguish three regimes of blockaded bypass, deterred bypass and accommodated bypass depending on the entrant's unit cost. We show that the make-or-buy decision of the entrant is not necessarily technologically efficient: when bypass is chosen, it is always the cheapest option but access may be chosen when it is not cost effective.
Liège Competition and Innovation Institute - LCII
Researchers
http://hdl.handle.net/2268/146679
10.1007/s11149-017-9337-7

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