Article ID: | iaor2013751 |
Volume: | 47 |
Issue: | 1 |
Start Page Number: | 97 |
End Page Number: | 110 |
Publication Date: | Jan 2013 |
Journal: | Transportation Research Part A |
Authors: | McHardy Jolian, Reynolds Michael, Trotter Stephen |
Keywords: | economics, commerce, supply & supply chains |
A simple theoretical network model is introduced to investigate the problem of network interconnection. Prices, profits and welfare are compared under welfare maximisation, network monopoly and a scenario with competition over one part of the network. Given that inducing actual competition may bring disbenefits such as cost duplication and co‐ordination costs, we also explore the possibility of a regulator using the threat of entry on a section of the monopoly network in order to bring about the socially preferred level of interconnectivity. We show that there are feasible parameter values for which such a threat is plausible.