Philippe Choné

Universal service obligations and competition

Abstract We provide some elements to assess and compare various regulatory rules for the allocation and funding of universal service obligations (USOs). We restrict ourselves to ubiquity and spatial non discrimination constraints. We examine the welfare consequences of two systems: First, a regulation where USOs are imposed only on the incumbent firm (restricted-entry regulation) and second, a ‘pay or play’ rule where the entrant may serve non profitable users. Whereas pay or play regulation dominates when only the ubiquity constraint is at work, this result no longer holds when non discrimination is added.

Allocating and funding universal service obligations in a competitive market

Abstract We examine, in a network market open to competition, various mechanisms for allocating and funding universal service obligations among agents (rival firms and consumers). The obligations we consider are geographic ubiquity and nondiscrimination. We analyze, from both the efficiency and equity point of views, the respective advantages of a ‘restricted-entry’ system (where the entrant is not allowed to serve high cost consumers) and a ‘pay-or-play’ system. We show that pay-or-play regulation always dominates restricted-entry regulation under ubiquity constraint alone. This result no longer holds when the regulator imposes also the nondiscrimination constraint.

Optimal litigation strategies with observable case preparation

This paper investigates the strategic effects of case preparation in litigation. Specifically, it shows how the pretrial efforts incurred by one party may alter its adversarys incentives to settle. We build a sequential game with one-sided asymmetric information where the informed party first decides to invest in case preparation, and the uninformed party then makes a settlement offer. Overinvestment, or bluff, always prevails in equilibrium: with positive probability, plaintiffs with weak cases take a chance on investing, and regret it in case of trial. Furthermore, due to the endogenous investment decision, the probability of trial may (locally) decrease with case strength. Overinvestment generates inefficient preparation costs, but may trigger more settlements, thereby reducing trial costs.

Nonlinear Pricing and Exclusion: II. Must-Stock Products

We adapt the exclusion model of Choné and Linnemer (2014) to reflect the notion that dominant firms are unavoidable trading partners. In particular, we introduce the share of the buyer’s demand that can be addressed by the rival as a new dimension of uncertainty. Nonlinear price-quantity schedules allow the dominant firm to adjust the competitive pressure placed on the rival to the size of the contestable demand, and to distort the rival supply at both the extensive and intensive margins. When disposal costs are sufficiently large, this adjustment may yield highly nonlinear and locally decreasing schedules, such as retroactive rebates.