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.
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 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
Date of revision:
Contact details of provider:
Postal: CEDI, Brunel University,West London,UB8 3PH,United Kingdom
Phone: +44 (0)1895 266649
Fax: +44 (0)1895 266649
Web page: http://www.cedi.org.uk
More information through EDIRC
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)
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.:
- Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Vickers, John, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 1-17, January.
- Elisabetta Iossa & Patrick Legros, 2004.
"Auditing and Property Rights,"
RAND Journal of Economics,
The RAND Corporation, vol. 35(2), pages 356-372, Summer.
- repec:cep:stitep:260 is not listed on IDEAS
- Clark, Ephraim & Easaw, Joshy Z., 2007. "Optimal access pricing for natural monopoly networks when costs are sunk and revenues are uncertain," European Journal of Operational Research, Elsevier, vol. 178(2), pages 595-602, April.
- repec:eso:journl:v:33:y:2002:i:1:p:23-41 is not listed on IDEAS
- Esther Hauk & Sjaak Hurkens, 1996.
"Secret information acquisition in Cournot markets,"
Economics Working Papers
233, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1997.
- David Sappington, 2006. "Regulation in Vertically-Related Industries: Myths, Facts, and Policy," Review of Industrial Organization, Springer, vol. 28(1), pages 3-16, 02.
- Sjaak Hurkens & Nir Vulkan, 1996.
"Information acquisition and entry,"
Economics Working Papers
155, Department of Economics and Business, Universitat Pompeu Fabra.
- Iossa, Elisabetta & Stroffolini, Francesca, 2002. "Price cap regulation and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 1013-1036, September.
- Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 653-671, May.
- Salvatore Piccolo, 2011. "Communicating Vertical Hierarchies: the Adverse Selection Case," CSEF Working Papers 273, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarmistha Pal).
If references are entirely missing, you can add them using this form.