Vertical Integration and Costly Demand Information in Regulated Network Industries
AbstractWe study how vertical integration in regulated network industries affects the acquisition and transmission of socially valuable information on demand. We consider a regulated upstream monopoly with downstream unregulated Cournot competition and demand uncertainty. Demand information serves to set the access price and to foster competition in the unregulated segment but demand realizations can be observed at some cost only by the upstream monopolist; information acquisition is also unobservable. We show that vertical integration favours acquisition of demand information because of the transmission of information generated by the public nature of the regulatory mechanism. This holds both when access to information is easier for the upstream firm and when it is easier for downstream firms.
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Bibliographic InfoPaper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 08-03.
Length: 32 pages
Date of creation: Feb 2008
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Other versions of this item:
- Elisabetta Iossa & Francesca Stroffolini, 2012. "Vertical Integration and Costly Demand Information in Regulated Network Industries," Review of Industrial Organization, Springer, vol. 40(4), pages 249-271, June.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L5 - Industrial Organization - - Regulation and Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-20 (All new papers)
- NEP-COM-2008-09-20 (Industrial Competition)
- NEP-IND-2008-09-20 (Industrial Organization)
- NEP-MIC-2008-09-20 (Microeconomics)
- NEP-NET-2008-09-20 (Network Economics)
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