We investigate how various institutional settings affect a network provider’s incentives to invest in infrastructure quality. Under reasonable assumptions on demand, investment incentives turn out to be smaller under vertical separation than under vertical integration, though we also provide...

In this paper, we study the impact of government's budget constraint on the optimal industrial policy in industries with increasing returns to scale. We show that privatization is preferred to regulation for intermediate values of the shadow cost of public funds (i.e., the Lagrange multiplier of...