“A Note on Access Pricing, Role Exchangeability and Incentives to Invest”

The traditional Ramsey pricing and the Efficient Component Pricing Rule for access charges to a facility are modified in this paper, taking into account the constraint that profits per unit of investment must be the same between entrants and the incumbent (a general equilibrium requirement). It is shown that the required modifications are applicable even when the sustainability constraint is not operative. If this new condition is not satisfied, the incumbent will have an incentive to postpone the construction of the critical facility.