Organisers: Ray Rees (University of Munich) and Marcel Thum (University of Dresden).
How can efficient entry in network industries be achieved? What are the efficient access prices and interconnection fees for allowing entrants access to an incumbent's network? These were some of the questions posed by Mark Armstrong, the keynote speaker for the CESifo workshop on Industrial Organisation. Taking for instance the classical example of mail services, it is often argued that deregulation would basically eliminate services for many people, e.g. in rural areas. The high cost of delivering to remote areas makes it unattractive to maintain services there under competitive conditions. However, there is an alternative to maintaining the current monopolistic structure. Alternatively, one could allow regulated entry. To prevent entrants engaging in cream-skimming by only providing services to the low-cost customers, a corrective output tax has to be imposed on services in low-cost areas. The tax can be used to finance a universal service fund which subsidises services in high-cost areas. Similar schemes can be used to generate efficient "buy or make" decisions in network infrastructure or efficient interconnection decisions. The importance of appropriate access prices was also highlighted in a series of papers presented at the workshop by Toker Doganoglu, Marco Haan, Justus Haucap and Steffen Hoernig.
Another highly debated policy issue was the design of spectrum auctions. Friedel Bolle argued that the often used multiple-round auctions offer an invitation to collude. A better scheme would be the sale of spectra either through single-round Vickrey auctions or through multiple-round first-price auctions with a publicly announced last round. Elmar Wolfstetter showed that the low revenue of the Swiss spectrum auction was not only due to bad luck or changing market conditions but was also caused by an inappropriate design of the auction. One of the disadvantages of the Swiss design was, for instance, that the number and size of licenses was predetermined thus reducing competition amoung the bidders.
Several of the papers presented in the workshop dealt with highly relevant topics for what is often termed the "new economy". Huw Dixon explored the relationship between technological change and stock market valuation. Kai Konrad analysed the profitability of mergers and collusion when markets take the form of contests. Jay Pil Choi showed that bundling of components can be used by a monopolistic incumbent to effectively deter entry. In Diana Barrowclough's paper, the regulator in the broadcasting market faces the dilemma to create either the optimal diversity of programming or limit socially wasteful advertising on TV. John Evans showed how incumbent firms can deter entry by lobbying the regulator, and characterised the resulting welfare losses.
RR/MT (21 July 2001)
For more information on the workshop, see the following pages:
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