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Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry

Author

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  • David Reiffen
  • Laurence Schumann
  • Michael R. Ward

Abstract

One concern about regulated monopolies entering unregulated vertically‐related markets is that they will discriminate against competitors of their unregulated affiliates. However, prohibiting regulated monopolies from offering related goods may preclude production by the most efficient provider. We take advantage of variation across geographic cellular phone markets in the US to examine the effect of integration on output, quality and prices. We find some evidence consistent with efficiencies (greater concentration of lines to users is associated with greater output and higher quality) and some consistent with discrimination (greater interconnection facility ownership concentration is associated with lower output and quality).

Suggested Citation

  • David Reiffen & Laurence Schumann & Michael R. Ward, 2000. "Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 253-286, September.
    • Handle: RePEc:bla:jindec:v:48:y:2000:i:3:p:253-286
    DOI: 10.1111/1467-6451.00123
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    Citations

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    Cited by:

    1. Chen-Ju Lin & Ci-Rong Li & Chih-Peng Chu, 2011. "The effects of applying a hybrid method with a macro–micro approach for market research in the telecommunication industry," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(4), pages 829-843, June.
    2. Growitsch, Christian & Müller, Gernot & Stronzik, Marcus, 2008. "Ownership Unbundling in der Gaswirtschaft: Theoretische Grundlagen und empirische Evidenz," WIK Discussion Papers 308, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    3. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    4. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    5. Bustos Alvaro E & Galetovic Alexander, 2009. "Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-52, September.
    6. Russell Pittman, 2001. "Vertical Restructuring of the Infrastructure Sectors of Transition Economies," Industrial Organization 0111002, University Library of Munich, Germany.
    7. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
    8. Mandy, David M. & Mayo, John W. & Sappington, David E.M., 2016. "Targeting efforts to raise rivals' costs: Moving from “Whether” to “Whom”," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 1-15.
    9. Joshua S. Gans & Stephen P. King & Julian Wright, 2005. "Wireless Communications," Monash Economics Working Papers archive-45, Monash University, Department of Economics.
    10. Brunekreeft, Gert, 2001. "Regulation and third-party discrimination in vertically related markets: The case of German electricity," Discussion Papers 74 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
    11. Paul Zimmerman, 2008. "Strategic incentives under vertical integration: the case of wireline-affiliated wireless carriers and intermodal competition in the US," Journal of Regulatory Economics, Springer, vol. 34(3), pages 282-298, December.
    12. David Sappington, 2006. "On the Merits of Vertical Divestiture," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 171-191, November.

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