Strategic choice of financing systems in regulated and interconnected industries |
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| Institution: | 1. Huntington Medical Research Institutes, Pasadena, CA, United States;2. Heart Institute, Good Samaritan Hospital, Los Angeles, CA, United States;3. Division of Cardiovascular Medicine of the Keck School of Medicine, University of Southern California, Los Angeles, CA, United States;4. Department of Physiology, Brody School of Medicine, East Carolina University, Greenville, NC, United States;5. Diabetes and Obesity Research Center, Sanford-Burnham Medical Research Institute, Orlando, FL, United States;1. Key Laboratory of Industrial Biotechnology, Ministry of Education, School of Biotechnology, Jiangnan University, 1800 Lihu Road, Wuxi, Jiangsu 214122, China;2. Synergetic Innovation Center of Food Safety and Nutrition, 1800 Lihu Road, Wuxi, Jiangsu 214122, China;3. Zhejiang Guyuelongshan Shaoxing Wine Company, 13 Yangjiang Road, Shaoxing, Zhejiang 312000, China;1. State Key Laboratory of Exercise Training and Monitoring, Sport Biological Center, China Institute of Sport Science, Beijing, China;2. Nanchang Normal University, Jiangxi, China;3. Department of Kinesiology, Brock University, ON, Canada;4. Department of Kinesiology, Beijing Institute of Sport Science, Beijing, China;5. L|E|C|O|M, Bradenton, FL, USA;1. Wenlan School of Business, Zhongnan University of Economics and Law, China;2. Center for Chinese Public Administration Research/School of Government, Sun Yat-sen University, China;1. Cardiología y Medicina Vascular. Escuela Nacional de Medicina, Tecnológico de Monterrey, Monterrey, NL, México;2. Centro de Investigación Básica y de Transferencia, Hospital Zambrano Hellion, Tecnológico de Monterrey, San Pedro Garza García, NL Mexico;1. Department of Biochemistry, Faculty of Veterinary Medicine, Suez Canal University, Ismailia, Egypt;2. Genetics Unit, Department of Histology and Cell Biology, Faculty of Medicine, Suez Canal University, Ismailia, Egypt;3. Department of Pharmacology, Faculty of Medicine, Suez Canal University, Ismailia, Egypt;4. Department of Histology, Faculty of Medicine, Suez Canal University, Ismailia, Egypt;5. Department of Pharmacology & Toxicology, Faculty of Pharmacy, Suez Canal University, Ismailia 41522, Egypt |
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| Abstract: | The growing importance of inter-network exchanges in infrastructure-based utilities influences regulatory choices and access pricing for downstream services using the networks. We analyze this problem in a setting where the infrastructure managers of two bordering countries are in charge of pricing the access to their networks for downstream transport firms that provide international services. Network costs can be financed through public funds and user charges.In this context, access prices are affected by the incomplete internalization of consumers' surplus and infrastructure costs; we analyze how this distortion at the access pricing level generates a distortion in the levels of public funds dedicated to infrastructure financing.Because of these distortions, it turns out that in a non-cooperative setting the second-best outcome might consist in the simultaneous adoption of a no-subsidy system. However, multiple equilibria typically exist and the second-best outcome is never a stable equilibrium. Other properties of the different possible equilibria are studied, as well as the impact of supra-national policies aimed at encouraging the development of international services. Finally, we show that the coordination problems deriving from the existence of multiple equilibria can, sometimes, be solved by separating the choice of a regulatory mode from the access pricing stage, thereby allowing the infrastructure managers to commit to use a specific financing system before setting the access price. |
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