Strategic Behaviour in Network Industries

Strategic Behaviour in Network Industries

A Multidisciplinary Approach

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

This in-depth book explains how institutional changes such as the privatization and liberalization of network industries, for example transport, energy or telecommunications, can frequently be disappointing. The expected benefits such as lower prices, innovation and better services fail to materialize, often because the number of competitors is low. The authors demonstrate how strategic actor behaviour of one or more of the firms involved can help explain these disappointing results.

Chapter 3: General Breeding Grounds for Strategic Behaviour

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

Subjects: business and management, organisational behaviour, economics and finance, game theory, institutional economics, public sector economics


In this chapter, we describe the breeding grounds of strategic behaviour in general as it occurs in any industry. Our method here is as follows. We begin with a literature scan for strategic behaviour. This yields a wide variety. We subsequently explore the backgrounds of this behaviour. In doing so, we ask the question regarding what this behaviour is based on and how it is possible that the strategist is given the opportunity to display it. We call this background the breeding ground for strategic behaviour. We will discuss three of these breeding grounds here: 1. Fewness. A limited number of dominant companies with a disproportionate amount of market power forms a breeding ground for strategic behaviour. Even in contexts with many players, this dominance makes checks and balances impossible. Position. An established position, but also acquiring a new position offers possibilities for strategic behaviour. Information asymmetry. Differences in information provision between actors present an opportunity for strategic behaviour. 2. 3. The above three features mutually overlap and reinforce each other, but leaving one out would make the picture incomplete. The structure of this chapter is as follows. In three subsequent sections, we describe the above-mentioned ‘breeding grounds’. For each of them, we first describe how they can be valued and, in the second place, what concrete forms of strategic behaviour ensue from them. 3.1 3.1.1 BREEDING GROUND 1: FEWNESS Fewness Fewness has two famous configurations for strategic behaviour: the monopoly and the oligopoly. The most obvious breeding ground for...

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