Competition in Network Industries--Where and How to Introduce It
Author: Michael Klein and Philip Gray Date: 1/1/1997 (PDF, 200KB)
Deregulation and new technology, including the advent of smart markets, have provided new opportunities for competition in power, water, transport, and telecommunications. Michael Klein and Philip Gray look at the various options for competition--competition for the market (franchising), competition in the market (open access, pooling, and time-tabling), and competition among networks. How network competition is introduced and how effectively and easily it is implemented will vary from one network industry to another. But the authors propose some general rules: The more complex the network and the lower the sunk costs, the greater the value of introducing competition from other networks. The faster the rate of technical change, the greater the dynamic benefits from competition. And the lower the regulatory capacity, the more efficient it will be to opt for competition.