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Journal ArticleDOI

Strategic choice of financing systems in regulated and interconnected industries

01 Feb 2005-Journal of Public Economics (North-Holland)-Vol. 89, Iss: 2, pp 233-259
TL;DR: In this paper, the authors analyze the problem of access pricing for downstream services using the infrastructures in a setting where the infrastructure managers of two bordering countries are in charge of pricing the access to their networks and determine the equilibrium non-cooperative choice of a financing system.
About: This article is published in Journal of Public Economics.The article was published on 2005-02-01 and is currently open access. It has received 13 citations till now. The article focuses on the topics: Subsidy.
Citations
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Journal ArticleDOI
TL;DR: In this article, the authors provide a selective survey of the recent literature that deals with transport policy competition between governments and show the potential relevance of strategic behaviour by governments in deciding on prices (taxes, tolls) and investment in infrastructure capacity.

52 citations

Journal ArticleDOI
TL;DR: In this paper, the authors compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks and show that there is more tax exporting in serial transport corridors than on competing parallel road networks.
Abstract: The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually be undesirable to allow the tolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.

31 citations

Journal ArticleDOI
TL;DR: In this paper, the authors compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks and show that there is more tax exporting in serial transport corridors than on competing parallel road networks.
Abstract: The purpose of this paper is to compare the interaction between pricing and capacity decisions on simple serial and parallel transport networks. When individual links of the network are operated by different regional or national authorities, toll and capacity competition is likely to result. Moreover, the problem is potentially complicated by the presence of both local and transit demand on each link of the network. We bring together and extend the recent literature on the topic and, using both theory and numerical simulation techniques, provide a careful comparison of toll and capacity interaction on serial and parallel network structures. First, we show that there is more tax exporting in serial transport corridors than on competing parallel road networks. Second, the inability to toll transit has quite dramatic negative welfare effects on parallel networks. On the contrary, in serial transport corridors it may actually beunde sirableto allow thetolling of transit at all. Third, if the links are exclusively used by transit transport, toll and capacity decisions are independent in serial networks. This does not generally hold in the presence of local transport. Moreover, it contrasts with a parallel setting where regional authorities compete for transit; in that case, regional investment in capacity leads to lower Nash equilibrium tolls.

19 citations

Journal ArticleDOI
TL;DR: In this paper, the authors developed a simple model of regulatory competition in a multi-agency world and argued that regulatory competition and potential conflicts arise in a similar way to tax competition between jurisdictions.
Abstract: In this paper, we develop a simple model of regulatory competition in a multi-agency world. This argues that regulatory competition and potential conflicts arise in a similar way to tax competition between jurisdictions. This is then applied to contrasting situations drawn from metropolitan transport and cross-border rail services in Europe. The analysis demonstrates how regulatory conflicts can lead to inefficiencies which impact not just on the provision of transport services, but also on the potential wider benefits from transport, most notably labour market efficiency and productivity growth.

18 citations

Journal ArticleDOI
TL;DR: In this paper, the welfare losses from non-cooperative investment financing policy and access pricing are derived and the impact of strategic interaction between the countries' access prices on the choice of financing policy is investigated.
Abstract: This paper covers network investment problems under decentralized control of regulation, infrastructure ownership and management. The model features two countries managing domestic infrastructures, used simultaneously for downstream international service provision. Initially, the welfare losses from non-cooperative investment financing policy and access pricing are derived. The impact of strategic interaction between the countries' access prices on the choice of financing policy is investigated. Under strict budget balancing, there are no incentives for efficiency improving investments. Further, investment coordination is shown useless in the absence of regulatory coordination. Illustrations from European network regulation policy for energy and rail are presented.

9 citations

References
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Book
01 Jan 1993
TL;DR: A Theory of Incentives in Procurement and Regulation (TIIN) as mentioned in this paper is a popular textbook for regulatory economics, with a particular focus on the regulation of natural monopolies such as military contractors, utility companies and transportation authorities.
Abstract: More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular, though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities. The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics. Each chapter opens with a discussion of the economic issues, an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory. Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques. There is a large set of review problems at the end of the book.

3,602 citations

Journal ArticleDOI
TL;DR: In this paper, the authors consider the problem of adjusting the marginal utility of money to different people in a purely competitive system with no foreign trade and assume that private and social net products are always equal or have been made so by State interference not included in the taxation.
Abstract: TILE problem I propose to tackle is this: a given revenue is to be raised by proportionate taxes on some or all uses of income, the taxes on different uses being possibly at different rates; how should these rates be adjusted in order that the decrement of utility may be a minimum? I propose to neglect altogether questions of distribution and considerations arising from the differences in the marginal utility of money to different people; and I shall deal only with a purely competitive system with no foreign trade. Further I shall suppose that, in Professor Pigou's terminology, private and social net products are always equal or have been made so by State interference not included in the taxation we are considering. I thus exclude the case discussed in Marshall's Principles in which a bounty on increasing-return commodities is advisable. Nevertheless we shall find that the obvious solution that there should be no differentiation is entirely erroneous. The effect of taxation is to transfer income in the first place from individuals to the State and then, in part, back again to rentiers and pensioners. These transfers will slightly alter the demand schedules in a way depending on the incidence of the taxes and the manner of their expenditure. I neglect these alterations; 1 and I also suppose that \" a given revenue \" means a given money revenue, \" money \" being so adjusted that its marginal utility is constant. This problem was suggested to me by Professor Pigou, to whom I am also indebted for help and encouragement in its solution. In the first part I deal with the perfectly general utility function and establish a result which is valid for a sufficiently small revenue, and takes a peculiarly simple form if we can treat the revenue as an infinitesimal. I prove, in fact, that in raising an infinitesimal revenue by proportionate taxes on given commodities the taxes should be such as to diminish in the same proportion the production of each commodity taxed. In the second part I assume that the utility function is quadratic, which means roughly that the supply and demand

2,563 citations

Journal ArticleDOI
TL;DR: The tax competition literature as mentioned in this paper argues that independent governments engage in wasteful competition for scarce capital through reductions in tax rates and public expendi- ture levels, and identifies efficiency enhancing roles for competition among governments.
Abstract: A central message of the tax competition literature is that independent governments engage in wasteful competition for scarce capital through reductions in tax rates and public expendi- ture levels. This paper discusses many of the contributions to this literature, ranging from early demonstrations of wasteful tax com- petition to more recent contributions that identify efficiency- enhancing roles for competition among governments. Such roles involve considerations not present in earlier models, including im- perfectly-competitive market structures, government commitment problems, and political economy considerations.

1,735 citations

Journal ArticleDOI
TL;DR: In the noncooperative game, subsidies change the initial conditions of the game that firms play as mentioned in this paper, and the terms of trade move against the subsidizing country, but its welfare can increase if price exceeds the marginal cost of exports.

1,566 citations

Book
03 Dec 1999
TL;DR: Laffont and Tirole as discussed by the authors have written a much-needed book that brings together the theory and practice of telecommunications regulation, especially interconnection pricing, in an era of increasing competition.
Abstract: Laffont and Tirole (LT hereinafter) have written a much-needed book that brings together the theory and practice of telecommunications regulation, especially interconnection pricing, in an era of increasing competition It is almost a clich6 to observe that the work of these authors, who have produced so much prominent research in this area, is insightful, comprehensive, and elegant; yet such descriptions are needed to aptly characterize this book The main design feature of the book is a separation of the text from technical boxes that present formal models This is a laudable plan and it succeeds in making much of the book accessible to those who are familiar with the issues but are not professional economists It is still fairly technical reading and in places cannot be well understood without venturing into the technical boxes Certainly only professional economists with some prior understanding of the models can fully digest the material But for professionals and nonprofessionals alike the effort of reading is rewarded as the text lays bare basic economic lessons that are often misunderstood or lost in the contentiousness and complex details of regulatory practice Even to those who are very familiar with the material, the book is worth reading simply for the enjoyment of witnessing the depth and breadth of LT's mastery of the material, and their customary eloquence in putting it all together This book should be read by every consultant, industry participant, and academician with an interest in telecommunications regulation; by any economist who wants to become acquainted with the revolution occurring in the industry; and by the technical staffs of national regulatory agencies It may be too technical for generalists and state-level regulatory commissions, but it should at least be skimmed by everyone involved in regulating the industry

887 citations