Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
Chapter 12: Network Externalities and the USO: A Two-sided Market Approach
François Boldron, Helmuth Cremer, Philippe De Donder, Denis Joram and Bernard Roy 1 INTRODUCTION Externalities and particularly network externalities are among the most prominent arguments used to justify a Universal Service Obligation (USO) in the postal sector. This is an important issue for the future of the postal sector. The very idea of universal service has remained relatively uncontested during the early stages of the liberalization process. More recently, however, the USO in itself has increasingly been questioned. The question is whether the social beneﬁts associated with the USO are signiﬁcant enough to justify its cost and in particular the impediment to competition it often implies. In a recent paper, Cremer et al. (2008) provided an overview of the beneﬁts and costs of the USO in the postal sector. They presented and assessed alternative economic justiﬁcations of the USO. In particular, the issue of network externalities was noted, but only a sketch of the main ideas was provided. The current chapter takes up this issue and provides a more formal and thorough analysis which is inspired by recent developments in the industrial economics literature. Network externalities constitute a classical justiﬁcation of the USO in telecommunications. They arise when the beneﬁts from using a network depend on the number of individuals who are connected to the network. This traditional view relies on a symmetric view of externalities where all subscribers are potential callers and receivers. This view is probably of limited relevance for the...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.