Integration and Separation with Costly Demand Information
AbstractWe consider an industry characterized by a regulated natural monopoly in the upstream market and Cournot competition with demand uncertainty in the unregulated downstream market. The realization of demand cannot be observed by the regulator, whilst it can be privately observed at some cost by the upstream monopolist. Information acquisition is also unobservable. We study whether it is better to allow the monopolist to operate in the downstream market (integration) or instead to exclude it (separation). We show that asymmetric information on demand favours separation but unobservability of information acquisition favours integration.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 170.
Date of creation: 01 Jan 2007
Date of revision:
Publication status: Published in Review of Industrial Organization, 2012, Vol. 40, 4, pp 249-271.
Information acquisition; liberalization and separation;
Other versions of this item:
- Elisabetta Iossa & Francesca Stroffolini, 2007. "Integration and Separation with Costly Demand Information," The Centre for Market and Public Organisation 07/167, Department of Economics, University of Bristol, UK.
- 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-2007-01-23 (All new papers)
- NEP-COM-2007-01-23 (Industrial Competition)
- NEP-MIC-2007-01-23 (Microeconomics)
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