On the nature of price competitionunder universal service obligations: a note

The imposition of universal coverage and uniform pricing constraints, as part of the universalservice obligations, makes the universal service provider less aggressive in the price game when itcompetes with a firm that does not cover the whole set of markets (Valletti et al., 2002). In thispaper, we fully characterize the resulting price equilibrium when universal service obligations areimposed. With a limited market coverage by the entrant or a small degree of degree of productdifferentiation, the equilibrium is a mixed strategy one....