Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?
AbstractIn 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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Bibliographic InfoPaper provided by Portuguese Competition Authority in its series Working Papers with number 16.
Length: 38 pages
Date of creation: Nov 2006
Date of revision:
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Bottleneck Input; Vertical Integration; Oligopoly; Entry;
Other versions of this item:
- Duarte Brito & Pedro Pereira, 2010. "Access to Bottleneck Inputs under Oligopoly: A Prisoners’ Dilemma?," Southern Economic Journal, Southern Economic Association, vol. 76(3), pages 660-677, January.
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-COM-2007-01-23 (Industrial Competition)
- NEP-MIC-2007-01-23 (Microeconomics)
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- Marc Bourreau & Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2009.
"Upstream Competition between Vertically Integrated Firms,"
PSE Working Papers
- Marc Bourreau & Johan Hombert & Jerome Pouyet & Nicolas Schutz, 2011. "Upstream Competition between Vertically Integrated Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 677-713, December.
- Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the â€œLadder of Investmentâ€ Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.
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