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Bottleneck Access with Structural Regulation and Endogenous Competition

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  • Luciano Greco

    ()
    (University of Padova)

  • Fabio Manenti

    ()
    (University of Padova)

Abstract

In a simple model of network industry, where an upstream monopolist provides an essential input for downstream service supply, we analyze the competitive settings arising in the downstream market under alternative regulatory frameworks; we combine structural (i.e. vertical integration, functional/ownership separation) and conduct (discriminatory and nondiscriminatory access) regulatory remedies. Downstream firms are characterized by different levels of cost efficiency in the provision of the service. We show that the degree of heterogeneity in firmsÕ cost efficiency is critical to the determination of the amount of competition that emerges in the downstream market, and of the efficiency of the industry. We show that i) when downstream firms are significantly heterogenous, discriminatory access fees may be socially desirable and ii) vertical integration is always socially preferable.

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Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0162.

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Length: 26 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:pad:wpaper:0162

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Related research

Keywords: Vertical Integration; Functional Separation; Ownership Separation; Regulation; Discriminatory Access Fees. JEL: L13; L22; L44;

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