Rent Extraction by an Unregulated essential Facility
AbstractThis paper shows that a regulator should be careful when regulating a final product which industry is characterized by an unregulated essential facility sold through non-linear tariffs. Two regulatory environments are considered: the Laffont-Tirole framework with exogenous public funds and the Ramsey-Boiteux setting with a unique budget constraint over all the regulated activities. In both cases, the upstream monopoly obtains greater profits when there is regulation than when there is not, i.e. when the upstream monopoly deals directly with the downstream firm. Therefore, if it has this opportunity, the regulator chooses not to regulate the downstream firm in order to linit this rent extraction.
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Bibliographic InfoPaper provided by Toulouse - GREMAQ in its series Papers with number 00-538.
Length: 31 pages
Date of creation: 2000
Date of revision:
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Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
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TARIFFS ; REGULATIONS ; MONOPOLIES;
Other versions of this item:
- Boldron, Francois & Hariton, Cyril, 2002. "Rent Extraction by an Unregulated Essential Facility," Journal of Regulatory Economics, Springer, vol. 22(1), pages 85-95, July.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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