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Incentives for Discrimination when Upstream Monopolists Participate in Downstream Markets

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  • Weisman, Dennis L
  • Kang, Jaesung
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    Abstract

    A regulated upstream monopolist supplies an essential input to firms in a downstream market. If an upstream monopolist vertically integrates downstream, non-price discrimination becomes a concern. Discrimination always arises in equilibrium when the vertically integrated provider (VIP) is no less efficient than its rivals in the downstream market, but it does not always arise when the VIP is less efficient than its rivals. Numerical simulations that parameterize the regulator's ability to monitor discrimination in the case of long-distance telephone service in the U.S. reveal that pronounced efficiency differentials are required for the incentive to discriminate not to arise in equilibrium. Copyright 2001 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 20 (2001)
    Issue (Month): 2 (September)
    Pages: 125-39

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    Handle: RePEc:kap:regeco:v:20:y:2001:i:2:p:125-39

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. Schmidtchen, Dieter & Bier, Christoph, 2005. "Killing the goose that may have laid the golden egg? The incentives to discriminate and the regulation of access charges in the German electricity supply industry," CSLE Discussion Paper Series 2005-07, Saarland University, CSLE - Center for the Study of Law and Economics.
    2. Schmidtchen, Dieter & Bier, Christoph, 2006. "Netznutzungsentgelte als Wettbewerbshindernis? Diskriminierungsanreize und Regulierung in liberalisierten Strommärkten: Eine spieltheoretische Analyse," CSLE Discussion Paper Series 2006-05 [rev.], Saarland University, CSLE - Center for the Study of Law and Economics.
    3. Schmidtchen, Dieter & Bier, Christoph, 2006. "Netznutzungsentgelte als Wettbewerbshindernis? Diskriminierungsanreize und Regulierung in liberalisierten Strommärkten: Eine spieltheoretische Analyse," CSLE Discussion Paper Series 2006-05, Saarland University, CSLE - Center for the Study of Law and Economics.
    4. Mattos, César, 2009. "Open access policies, regulated charges and non-price discrimination in telecommunications," Information Economics and Policy, Elsevier, vol. 21(4), pages 253-260, November.
    5. Debashis Pal & David Sappington & Ying Tang, 2012. "Sabotaging cost containment," Journal of Regulatory Economics, Springer, vol. 41(3), pages 293-314, June.
    6. Sand, Jan Y., 2004. "Regulation with non-price discrimination," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1289-1307, November.
    7. Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
    8. Philip Gayle & Dennis Weisman, 2007. "Are input prices irrelevant for make-or-buy decisions?," Journal of Regulatory Economics, Springer, vol. 32(2), pages 195-207, October.
    9. Bier, Christoph & Schmidtchen, Dieter, 2006. ""Golden-Gans"-Effekt, Preisdiskriminierungsgefahr und die Regulierung von Netznutzungsentgelten," CSLE Discussion Paper Series 2006-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    10. Christoph Bier & Dieter Schmidtchen, . "„Golden-Gans“-Effekt, Preisdiskriminierungsgefahr und die Regulierung von Netznutzungsentgelten," German Working Papers in Law and Economics 2006-1-1137, Berkeley Electronic Press.
    11. David Mandy & David E. M. Sappington, 2004. "Incentives for Sabotage in Vertically Related Industries," Working Papers 0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
    12. Pei-Cheng Liao, 2010. "Discriminatory input pricing and strategic delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 263-276.
    13. Dieter Schmidtchen & Christoph Bier, . "Netznutzungsentgelte als Wettbewerbshindernis? Diskriminierungsanreize und Regulierung in liberalisierten Strommärkten – Eine spieltheoretische Analyse

      The Access Pricing Problem: Incenti
      ," German Working Papers in Law and Economics 2006-1-1158, Berkeley Electronic Press.
    14. Kao, Tina & Menezes, Flavio & Quiggin, John, 2012. "Optimal access regulation with downstream competition," Risk and Sustainable Management Group Working Papers 151201, University of Queensland, School of Economics.
    15. Banerjee, Aniruddha & Dippon, Christian M., 2009. "Voluntary relationships among mobile network operators and mobile virtual network operators: An economic explanation," Information Economics and Policy, Elsevier, vol. 21(1), pages 72-84, February.
    16. Flores, Daniel, 2005. "Price cap regulation in the Mexican telephone industry," Information Economics and Policy, Elsevier, vol. 17(2), pages 231-246, March.

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