On the nature of price competition under universal service obligations: a note

The imposition of universal coverage and uniform pricing constraints, as part of the universal service obligations, makes the universal service provider less aggressive in the price game when it competes with a firm that does not cover the whole set of markets (Valletti et al., 2002). In this paper, we fully characterize the resulting price equilibrium when universal service obligations are imposed. With a limited market coverage by the entrant or a small degree of degree of product differentiation, the equilibrium is a mixed strategy one.