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Welfare effects of vertical integration in energy distribution

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  • Mark Lijesen

Abstract

This paper analyses the welfare effects of vertical integration of networks and trade in energy markets. Vertical integration reduces the effect of double marginalisation, thus increasing welfare. On the other hand, vertical integration hinders equal competition, rendering the vertically integrated supplier a competitive advantage. We find that the net effect of vertical integration is beneficial to welfare if firms are symmetric, but the effect is ambiguous in the probably more relevant situation where the non-network firm has a cost advantage.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Memorandum with number 43.

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Date of creation: Jul 2002
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Handle: RePEc:cpb:memodm:43

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  1. Harrison, Mark & Kline, J. Jude, 2001. "Quantity competition with access fees," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 345-373, March.
  2. Richard Schmalensee, 1981. "Monopolistic Two-Part Pricing Arrangements," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 445-466, Autumn.
  3. de Bijl,Paul & Peitz,Martin, 2003. "Regulation and Entry into Telecommunications Markets," Cambridge Books, Cambridge University Press, number 9780521808378, April.
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Cited by:
  1. Heikki Kemppi & Adriaan Perrels, 2003. "Liberalised Electricity Markets - Strengths and Weaknesses in Finland and Nordpool," Research Reports 97, Government Institute for Economic Research Finland (VATT).
  2. Mark Lijesen, 2002. "End user prices in liberalised energy markets," CPB Discussion Paper 16, CPB Netherlands Bureau for Economic Policy Analysis.

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