Entry Regulation under Asymmetric Information about Demand: A Signalling Model Approach

This paper presents a game where the incumbent firm uses the price as a signal about demand size. Without observing the demand, the regulator has to decide if the entry of new firms will be allowed. The game has a pooling Perfect Bayesian Equilibrium in which the incumbent firm chooses the optimal price corresponding to low demand. With this strategy entry is deterred. With linear demand the pooling equilibrium is more likely to occur if the regulator expects a weaker form of competition. Besides, if there are two incumbent firms they have incentive to tacitly cooperate in order to deter entry.asymmetric information, entry regulation, signalling

The Effects of Vertical Separation and Access Price Regulation on Investment Incentives

We study the impact of vertical separation between an upstream firm and its subsidiary, which competes in the retail market with an independent firm, with the incentive to invest in network upgrade. This question is discussed under two alternative regimes concerning the price of the vital input sold by the upstream firm: cost orientation regulation and absence of access price regulation. We show that the investment incentive decreases with vertical separation under both regimes. However, it is not always true that the investment incentive is higher without regulation.access price regulation, vertical integration, investment incentives

Incomplete Regulation, Asymmetric Information and Collusion-Proofness

In an incomplete regulation framework the Regulator cannot replicate all the possible outcomes by himself since he has no influence on some firms present in the market. When facing asymmetric information regarding the regulated firm’s costs, it may be better for the Regulator to allow the other competitors to extract a truthful report from her through side-payments in a collusion and therefore the “Collusion-Proofness Principle” may not hold. In fact, by introducing an exogenous number of unregulated competitors, Social Welfare differences seem to favour a Collusion-Allowing equilibrium. However, such result will strongly depend on the relative importance given by the Regulator to the Consumer Surplus.Incomplete Regulation, Asymmetric Information, Collusion, Market Competition

DOES UNBUNDLING REALLY MATTER? THE TELECOMMUNICATIONS AND ELECTRICITY CASES

In this paper we discuss the European regulation policy regarding vertical separation in communications and electricity industries. In the electricity sector the discussion concerns ownership unbundling while in communications the regulatory debate is about functional separation. We conclude that for electricity, ownership unbundling seems to be the best option to achieve competition in wholesale markets although there is still some risks concerning investment. Instead, for the communication sector the regulatory options are deeply dependent on the intensity of network competition between operators that combine different technological platforms. Technology also seems to be a key driver for diverse regulatory approaches concerning the unbundling requirement.unbundling, communications, electricity, next generation networks

Location Decisions in a Natural Resource Model of Cournot Competition

This article focuses on the location decision of firms when competing in a duopoly. Using a spatial Cournot setting, we evaluate what is the optimal location decision of both firms in the linear city. Our original contribution is that firms are dependent on a natural resource input to be able to produce the output sought by the consumers, and that natural resource is controlled by a monopolist, not related with any of the downstream firms. We assume that the natural resource is located in one of the extremes of the market. As an example, we can think of the Port locations, where most important raw materials converge to and an intermediary firm controls the shipping process. Therefore, we solve a three stage location game, where in the first stage downstream firms choose their location, and in the next stages upstream and downstream choose how many quantities they sell in the market, assuming that both firms must sell their product in all points of the linear city ? an assumption that is common in the literature. We assume as well that the downstream firms support both input and output transportation costs. We analyze how that location outcome changes with the unit input transportation costs, and what are the consequences on the upstream and downstream firms? profits, input price, and social welfare. We also analyze what would be the optimal decision if a social planner was allowed to decide the location of both downstream firms. We conclude that downstream firms agglomerate independently of the unit input transportation cost. In addition, increases in the unit transportation cost bring the plants closer to the natural resource location, as initially expected. Moreover, the upstream firm loses more profit than the downstream firms when the input transportation conditions deteriorate. When we consider the problem of a social planner, we conclude that the location that firms choose is nearly the same than the location that maximizes total welfare in the economy, which happens due to the two reasons: there is weak competition between the two firms, which is induced by the quantity competition framework; and also because firms when maximizing their profit are also concerned with the minimization of total transportation costs, which is the main objective of a social planner

Unbundling in the telecommunications and the electricity sectors : how far should it go?

In this paper we discuss the European regulation policy regarding vertical separation in communications and electricity industries. In the electricity sector the discussion concerns ownership unbundling while in communications the recent regulatory debate is about functional separation. We conclude that for electricity, ownership unbundling seems to be the best option to achieve competition in wholesale markets although there is still some risks concerning investment. Instead, for the communication sector the regulatory options are deeply dependent on the intensity of network competition between operators that combine different technological platforms. Technology also seems to be a key driver for diverse regulatory approaches concerning the unbundling requirement.peer-reviewe

Airport’s Profit Sharing: Effects on Investment Incentives, Competition and Social Welfare

The aim of this paper is to investigate the effects of airport’s profit sharing on the incentives to invest, market competition and social welfare. The analysis is developed under two frameworks, one with a single airport and one with two competing airports, and both with airline competition. We conclude that airport’s profit sharing may display the highest incentive to invest when compared to alternative vertical relations. Also, we found that airport’s profit sharing excludes the independent airline, as long as the profit airport participation is not below 60%. Moreover, airport’s profit sharing does not allow the elimination of double marginalization and thus the effects on social welfare are ambiguous

Next Generation Access Networks: The Effects of Vertical Spillovers on Access and Innovation

The model that we develop here considers that an upstream firm sells a vital input to downstream firms. There are vertical spillovers and two different regulatory policies of the input price: cost oriented regulation and no-regulation. We also admit two alternative market structures: vertical integration and vertical separation. With this setting we study the effects of the spillovers on foreclosure and on the investment of the upstream firm with and without access price regulation in the two market structures. We conclude that in this setting foreclosure is not a necessary outcome and that the investment of the upstream firm depends on the values of the spillovers of each firm. The increase of the investment with regulation is more likely with vertical separation but it can also happen with vertical integration although this is not a typical result.access price regulation, vertical integration

Regulatory design under asymmetric information about demand

In this paper we compare the costs of two regulatory policies about the entry of new firms. We consider an incumbent firm that has more information about the market demand than the regulator. Then, the incumbent firm can use this advantage to persuade the regulator to make entry more difficult. With the first regulatory policy the regulator uses the incumbent price pre-regulation to get information about the demand. With the second regulatory policy the regulator design a mechanism to motivate the incumbent firm to price truthfully. We conclude that, for enough high values of the probability of low demand, the welfare is higher with the second (more active) regulatory policy.asymmetric information, entry regulation, signalling, adverse selection

Learning (to teach) English for academic purposes in pre-service teacher education

The aim of this study is to examine how inexperienced English teaching degree students deal with the challenge of having simultaneously to learn about and to deliver courses of academic English. Data was generated through participant observation in teacher development sessions of a language center located in a public university in Brazil. The results suggest that student teachers learned both English for Academic Purposes and how to teach it by studying and producing academic genres, by sharing their knowledge with their peers, and by reflecting collectively on their teaching practices