In this paper we point out that in regulated industries for tradeable services, as telecommunications, local decisions of national regulators may lead to inefficiencies deriving from discrepancies, between local and global cost-benefit evaluations. Assuming perfect information, we show that the configuration of such international industries is the result of sequential game among national regulators anticipating firms' strategies. We solve for subgame perfect Cournot-Nash equilibria of this game and investigate the impact on these equilibria of the non-cooperaative or cooperative attitude of domestic regulators and of the different policies they can implement (access regulation, imposition of franchise fees for access and installed capacity). This allows us to assess the efficiency of different market outcomes from a national and global point of view. In particular, we show that the pre-existence of differentiated services and cost asymmetries among new service providers could make the market access liberalization no longer a Pareto efficient outcome.
Key words
: International trade; Product differentiation; Cournot oligopoly; Regulation; Global telecommunication services
Published in Information Economics and Policy 7 (1995), 303-330