Regulated Input Price, Vertical Separation, and Leadership in Free Entry Markets
AbstractWe examine incentives of bottleneck facility holders to manipulate access charge accounting in free entry downstream markets. We consider the situation wherein one firm holds an upstream bottleneck facility and new entrants use it at the regulated price (access fee) to provide final products. The bottleneck facility holder affects the regulated input price. We investigate how vertical separation affects the incentive for manipulation and the resulting input price. We find that the results depend on whether the incumbent is the Stackelberg leader in the product market. If the incumbent cannot take leadership in the product market and faces Cournot competition, vertical separation reduces the incentive for manipulation and the resulting input price. The opposite result is derived when the incumbent can take leadership in the product market.
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 Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0853.
Date of creation: Aug 2012
Date of revision:
This paper has been announced in the following NEP Reports:
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.:
- Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, 03.
- Bustos Alvaro E & Galetovic Alexander, 2009.
"Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 9(1), pages 1-52, September.
- Alvaro Bustos & Alexander Galetovic, 2003. "Vertical Integration and Sabotage in Regulated Industries," Documentos de Trabajo 164, Centro de Economía Aplicada, Universidad de Chile.
- Axel Gautier & Manipushpak Mitra, 2003.
"Regulation of an Open Access Essential Facility,"
Bonn Econ Discussion Papers
bgse19_2003, University of Bonn, Germany.
- GAUTIER, Axel & MITRA, Manipushpak, 2003. "Regulation of an open access essential facility," CORE Discussion Papers 2003084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- GAUTIER, Axel & MITRA, Manipushpak, . "Regulation of an open access essential facility," CORE Discussion Papers RP -2053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Keizo Mizuno & Tetsuya Shinkai, 2006.
"Delegating Infrastructure Projects with Open Access,"
Journal of Economics,
Springer, vol. 88(3), pages 243-261, 09.
- Keizo Mizuno & Testuya Shinkai, 2006. "Delegating Infrastructure Projects with Open Access," Discussion Paper Series 28, School of Economics, Kwansei Gakuin University, revised Jan 2006.
- David Mandy & David Sappington, 2007.
"Incentives for sabotage in vertically related industries,"
Journal of Regulatory Economics,
Springer, vol. 31(3), pages 235-260, June.
- 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.
- W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, January.
- Richard Higgins & Arijit Mukherjee, 2010. "Deregulation redux: does mandating access to bottleneck facilities necessarily improve welfare?," Public Choice, Springer, vol. 142(3), pages 363-377, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fumiko Matsumoto).
If references are entirely missing, you can add them using this form.