Racing for Investment under Mandatory Access

Abstract

Abstract We analyze the impact of mandatory access on a race for investments and show that for a low (high) access price, firms wait (preempt each other). An access price increase tends to accelerate investment in general but may delay the first investment. While the first best cannot be achieved with a time-invariant access tariff, simple instruments such as ending access at a preset date or granting access holidays can improve efficiency. The former forces earlier investment when it would happen too late otherwise, while the latter allows for lower access prices later in order to delay a business-stealing second investment.