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The Liberalization of Network Industries: Meaning and Purpose

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Liberalizations in Network Industries

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Abstract

In this chapter, we analyze the economic meaning and objective of liberalization policies in network industries, traditionally characterized by natural monopoly and originally controlled by public ownership. We briefly recall the main features of alternative market forms (perfect competition, monopoly, monopolistic competition, and oligopoly) as distinct from those characterizing natural monopoly through decreasing average costs over the range of relevant output, non-divisibility of the network, high cost of duplicating the network infrastructure, and public or universal service obligations. We then outline the many economic facets of network industries and the evolution of liberalization and regulation in OECD countries.

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Notes

  1. 1.

    Network externalities arise when there are incentives for interconnection or compatibility among users, such as in the telecommunications services.

  2. 2.

    Switching costs can be contractual costs intentionally created by the seller in order to discourage users from switching to another provider, or they can be due to imperfect information of buyers about the service quality of available providers.

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Authors and Affiliations

  1. Department of Economics and Law, University of Rome Sapienza, Rome, Italy

    Antonio Nicita

  2. Italian Communications Authority, Rome, Italy

    Antonio Nicita

  3. Department of Economic Studies, University of Chieti-Pescara, Pescara, Italy

    Filippo Belloc

Authors
  1. Antonio Nicita
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  2. Filippo Belloc
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Nicita, A., Belloc, F. (2016). The Liberalization of Network Industries: Meaning and Purpose. In: Liberalizations in Network Industries. Springer, Cham. https://doi.org/10.1007/978-3-319-43717-0_1

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