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Regulation and internet access in Germany

Michael Reutter
We explain the recent events in the German market for online access using a model of a regulated monopoly renting phone lines to retailers. Retailers offer either a linear or a flat tariff to consumers. Consumer heterogeneity leads to adverse selectiion. We show why market entry for flatrate firms is difficult under a linear wholesale tariff. With both a linear and a flat wholesale tariff the consumer market shows a mixture of tariffs as well. When marginal costs are zero it is optimal to have a wholesale flatrate only. However, marginal moves towards this equilibrium are not always welfare improving.
Year of publication:
2001
Authors: Reutter, Michael
Publisher: München : CESifo
Subject: Internet | flatrate | adverse selection | Deutschland | Germany | Adverse Selektion | Adverse selection | Regulierung | Regulation | Netzregulierung | Access regulation | Theorie | Theory | Telekommunikationspreis | Telecommunications price | Lieferantenmanagement | Supplier relationship management
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