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Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?

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Author Info

  • Duarte Brito

    ()
    (Universidade Nova de Lisboa)

  • Pedro Pereira

    ()
    (Autoridade da Concorrência)

Abstract

In this article, we analyze the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream retail market. We develop a two-stage model, where in the first stage a downstream entrant negotiates an access price with three vertically integrated incumbents, and in stage 2 firms compete on Salop's circle. The incumbents may be asymmetrically located on the circle, to reflect differences in consumer shares. For some levels of asymmetry, the incumbents face a prisoners dilemma with respect to conceding access to their bottleneck inputs. Entry by a downstream firm may lead to lower retail prices. However, entry may also lead to higher retail prices for the access provider and for the entrant.

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File Function: First version, 2006
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Bibliographic Info

Paper provided by Portuguese Competition Authority in its series Working Papers with number 16.

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Length: 38 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:pca:wpaper:16

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Related research

Keywords: Bottleneck Input; Vertical Integration; Oligopoly; Entry;

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Cited by:
  1. Marc Bourreau & Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2009. "Upstream Competition between Vertically Integrated Firms," PSE Working Papers hal-00440126, HAL.
  2. repec:hal:wpaper:hal-00440126 is not listed on IDEAS
  3. Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the “Ladder of Investment†Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.

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