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Optimal Bypass and Cream Skimming

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Author Info
Laffont, Jean-Jacques
Tirole, Jean

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Abstract

This paper develops a normative model of regulatory policy toward bypass and cream skimming. It analyzes the effects of bypass on second-degree price discrimination, on the rent of the regulated firm, and on the welfare of low-demand customers. It shows that pricing under marginal cost may be optimal for the regulated firm, excessive cream skimming occurs if access to the bypass technology is not regulated, and the prohibition of bypass may increase or decrease the regulated firm's rent. Copyright 1990 by American Economic Association.

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File URL: http://links.jstor.org/sici?sici=0002-8282%28199012%2980%3A5%3C1042%3AOBACS%3E2.0.CO%3B2-9&origin=repec
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 80 (1990)
Issue (Month): 5 (December)
Pages: 1042-61
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Handle: RePEc:aea:aecrev:v:80:y:1990:i:5:p:1042-61

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  1. Vislie,J., 2001. "Environmental regulation, asymmetric information and foreign ownership," Memorandum 07/2001, Oslo University, Department of Economics. [Downloadable!]
  2. Marco Alderighi, 2006. "Why Should a Firm Choose to Limit the Size of Its Market Area?," ERSA conference papers ersa06p900, European Regional Science Association. [Downloadable!]
  3. Nathaniel Wilcox, 2004. "Believing in Economic Theory: Sex, Lies, Evidence, Trust and Ideology," Working Papers 2004-06 Classification-, Department of Economics, University of Houston. [Downloadable!]
  4. Joan Calzada Aymerich, 2004. "Worksharing and access discounts in the postal sector with asymmetrics information," Working Papers in Economics 112, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  5. Marco Alderighi & Claudio A. Piga, 2007. "Why Should a Firm Choose to Limit the Size of its Market Area?," Discussion Paper Series 2007_21, Department of Economics, Loughborough University, revised Aug 2007. [Downloadable!]
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  6. Pio Baake & Ulrich Kamecke, 2006. "New Networks, Competition and Regulation," Discussion Papers of DIW Berlin 568, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  7. Vislie,J., 2000. "Environmental regulation under asymmetric information with type-dependent outside option," Memorandum 18/2000, Oslo University, Department of Economics. [Downloadable!]
  8. Sujit Chakravorti & Jeffery W. Gunther & Robert R. Moore, 2005. "Universal access, cost recovery, and payment services," Working Paper Series WP-05-21, Federal Reserve Bank of Chicago. [Downloadable!]
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