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Optimal access regulation with downstream competition

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  • Tina Kao
  • Flavio Menezes

    ()

  • John Quiggin

Abstract

We analyze the setting of access prices for a bottleneck facility where the facility owner also competes in the deregulated downstream market. We consider a continuum of market structures from Cournot to Bertrand. These market structures are fully characterized by a single parameter representing the intensity of competition. We first show how the efficient component pricing rule should be modified as the downstream competitive intensity changes. We then analyse the optimal access price where a regulator trades off production efficiency and pro-competitive effects to maximize total surplus. Copyright Springer Science+Business Media New York 2014

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Bibliographic Info

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

Volume (Year): 45 (2014)
Issue (Month): 1 (February)
Pages: 75-93

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Handle: RePEc:kap:regeco:v:45:y:2014:i:1:p:75-93

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

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Keywords: Access regulation; Entry; Regulatory commitment ; Efficient component pricing rule; L51;

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  10. Armstrong, Mark & Vickers, John, 1998. "The Access Pricing Problem with Deregulation: A Note," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 115-21, March.
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  14. Sibley, David S. & Weisman, Dennis L., 1998. "Raising rivals' costs: The entry of an upstream monopolist into downstream markets," Information Economics and Policy, Elsevier, vol. 10(4), pages 451-470, December.
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  16. Menezes, Flavio & Quiggin, John, 2011. "More Competitors or more Competition? Market Concentration and the Intensity of Competition," Risk and Sustainable Management Group Working Papers 151195, University of Queensland, School of Economics.
  17. Grant, S. & Quiggin, J., 1994. "Capital Recommitment and Competition in Supply Schedules," Papers 280, Australian National University - Department of Economics.
  18. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
  19. Estache, Antonio & Valletti, Tommaso, 1999. "The Theory of Access Pricing: an Overview for Infrastructure Regulators," CEPR Discussion Papers 2133, C.E.P.R. Discussion Papers.
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