Co-investment, uncertainty, and opportunism:ex-Ante and ex-Post remedies

Abstract

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The Economics and Regulation of Network Industries

“…A markup on the cost of ex post entry can, in such cases, be superior for coverage because it will occur less often than the exercise of the option, which will already occur at less favorable demand states. Thus, Bourreau et al (2020a) validate Hausman's (1997 conjecture, although the required markup is hard to determine. In contrast, the option can be sold ex ante in a market.…”

“…Rather, the decision about coinvestment pricing for later entrants will have to be made ex ante. Bourreau et al (2020a) therefore suggest an approach that makes use of the real options theory mentioned previously and combines it with LRIC (or other cost-based) pricing of the coinvestment share. The idea is that ex post access to coinvestment or to shared assets will be granted at LRIC prices provided the access seeker presents an option certificate for such access.…”

“…These option certificates will be sold at the time of the investment, at which time the original investors receive the sales revenue. Besides the sale of ex ante options, Bourreau et al (2020a) consider LRIC pricing and LRIC pricing with a markup (as suggested by Hausman, 1997) as methods how such ex post entry might be accomplished. They use the coinvestment outcome without later entry as a benchmark and compare (a) cost-based entry, (b) cost-based entry with a markup and (c) cost-based entry with an ex ante option payment.…”

Mobile payments and interoperability: Insights from the academic literature

“…Regulators may allow firms to "co-invest" in infrastructure deployment ex-post, meaning that entrants can wait until any uncertainty of demand is resolved and then decide to co-invest. The importance of demand uncertainty and the timing of coinvestment is highlighted in Bourreau et al (2021). The set up of the theoretical model is largely similar to Bourreau et al (2018).…”

A Methodology for Assessing the Impact of Living Labs on Urban Design: The Case of the Furnish Project

“…The ex-ante design determines the possible benefits that an intervention has through simulation or modelling. Meanwhile, the ex-post approach bases its analysis on actual data gathered after the project implementation, measuring the actual impacts perceived by users [36,50].…”