Access Price Regulation and Price Discrimination in Intermediate Goods Markets
AbstractWe consider a model of a monopolistic network operator who sequentially offers two-parted access charges to symmetric downstream firms. We are particularly interested in analyzing an alternative to current regulatory practice of prescribing access. In particular, we look at the possibility of restraining the input monopolist's market power by endowing downstream firms with a regulatory option: In case they disagree with the contracts proposed to them, downstream firms can claim a regulated access price. It turns out that this form of regulation may prevent foreclosure even though allowing for price discrimination in the intermediary market. It proves itself more beneficial to welfare than the current practice of prescribing access prices above marginal cost. Interestingly, even though one expects discrimination against the first mover, non-discriminatory input prices below cost can occur when the monopolist faces the alternative of a rather strictly cost-oriented regulated access price. Non-discrimination rules will either not become effective or result in less optimal price levels.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 731.
Length: 28 p.
Date of creation: 2007
Date of revision:
Price discrimination; vertical contracting; exclusion; regulatory outside option;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-10-27 (All new papers)
- NEP-COM-2007-10-27 (Industrial Competition)
- NEP-MIC-2007-10-27 (Microeconomics)
- NEP-REG-2007-10-27 (Regulation)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).
If references are entirely missing, you can add them using this form.