We analyse a (differentiated good) industry where an incumbent firm owns a network good (essential input) and faces potential competition in the (downstream) retail market. Unlike the traditional approach, we consider a scenario where the decision to compete or not in the downstream segment is endogenous, and this decision depends on the particular mechanism designed by the utilitarian regulator. We assume that the technology of the potential entrant is private information. We derive the efficient (Ramsey) prices and access charge taking the impact of a non-discriminatory mechanism on entry decision into account. We assert that the optimal pricing formula must include a Ramsey term that is inversely related to the "modified" superelasticity of the retail good under consideration. We further show, under unknown cost, that there might be "excess" or "too little" entry compared to the socially optimal level.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2007004.
Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Francis Bloch & Axel Gautier, 2006.
"Access Pricing and Entry in the Postal Sector,"
CREPP Working Papers
0606, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
[Downloadable!]
Other versions: