This paper covers network investment problems under decentralized control of regulation, infrastructure ownership and management. The model features two countries managing domestic infrastructures, used simultaneously for downstream international service provision. Initially, the welfare losses from non-cooperative investment financing policy and access pricing are derived. The impact of strategic interaction between the countries' access prices on the choice of financing policy is investigated. Under strict budget balancing, there are no incentives for efficiency improving investments. Further, investment coordination is shown useless in the absence of regulatory coordination. Illustrations from European network regulation policy for energy and rail are presented.
This paper studies the issue of designing an optimal organizational form: design for sub-units' task allocation, decision-making structure, and incentive schemes for organizational members. Depending on the way tasks are allocated between the sub-units, and whether decision-making is centralized or not, organizations face a trade-off between coordination and information. Task allocation by production processes calls for coordination more strongly than the allocation by final products. Centralized decision-making serves for better coordination, whereas decentralization serves for better information. The coordinational benefit under centralization gets bigger as the organization's common uncertainty increases, and this benefit is magnified when the sub-units are functionally divided by production processes. The informational benefit under decentralization gets bigger as the organization's local uncertainty increases, and this benefit is magnified when the sub-units are designed autonomous. Thus, complementarily designed organizations tend to have centralized decision-making structures and fixed salary scheme, whereas less complementarily designed organizations tend to have decentralized decision-making and 'pay for performance' incentive contract.