Kuit, M.; I.S. Mayer and M. de Jong: Strategic actor behavior and innovative regulatory regimes in network industries. What Simulation games can tell about long term effects of alternative regulatory models, pp. 1-15. In: Proceedings of the Annual Eastern Conference Center for Research in Regulated Industries, Skytop, PA, 19-21 May (2004). () (The State University of New Jersey, Rutgers). International Proceeding (Refereed)
Network industries in most Western countries are in various stages of transition to being (becoming) liberalized markets. The long-term consequences of this transformation process in terms of price levels, service quality, innovation and sustainability are highly uncertain because each of the players in the game, both the incumbents, the entrants and possible other players, act strategically to reduce, delay, or control competition. This behavior has not been anticipated by orthodox economics, which assumes that disbanding public monopolies and allowing new players in will automatically install a competitive market situation. In reality, strategic behavior forces governments to design regulatory regimes and intervene in such a manner that level playing fields are promoted and public interests safeguarded.
Three main questions are addressed in our paper. First, what patterns of strategic behavior can be observed or expected to arise in liberalized network industries? Second, what innovative types of regulatory regimes and interventions are conceivable, which enable regulators to anticipate and deal with this strategic behavior? Third, what can the use of simulation games tell us about the future evolution of strategic behavior over time in alternative regulatory regimes? This latter question will be answered with the help of the Infrastratego Game, a game simulating the evolution of the Dutch electricity industry in the years 2002 - 2007 following different regulatory regimes. The Infrastratego game has been played with the participation of both professionals and students. The results of the game runs following alternative regimes will throw light on what patterns of strategic behavior can be expected in the long run, how regulatory regimes impact on this and how price levels and infrastructure reliability are affected.