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Access Profit-Sharing Regulation with Information Transmission and Acquisition

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  • Francesca Stroffolini

    () (University of Napoli “Federico II” and CSEF)

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    Abstract

    The paper analyses how information acquisition and transmission issues affect the determination of the optimal access pro.t-sharing plan in regulated network industries. It considers a regulated upstream monopoly with cost uncertainty and a downstream unregulated duopoly. It will be shown that, under an access price cap regulatory mechanism, the transfer of a sufficiently high share of access profits to consumers induces an integrated upstream monopolist to transmit to his downstream rival the information privately acquired on the upstream cost and this, in turn, may negatively affect welfare. On account of these effects the optimal access profit-sharing plan will depend on the variance and shape of cost distribution, on information acquisition costs as well as on the regulator’s redistributive concerns.

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    File URL: http://www.csef.it/WP/wp214.pdf
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    Bibliographic Info

    Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 214.

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    Date of creation: 05 Feb 2009
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    Handle: RePEc:sef:csefwp:214

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    Related research

    Keywords: Access price cap regulation; profit-sharing; information transmission and acquisition;

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    References

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    1. David Hawdon & Lester C. Hunt & Paul Levine & Neil Rickman, 2007. "Optimal sliding scale regulation: an application to regional electricity distribution in England and Wales," Oxford Economic Papers, Oxford University Press, vol. 59(3), pages 458-485, July.
    2. Fried, Dov, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 367-81, May.
    3. Lyon, Thomas P, 1996. "A Model of Sliding-Scale Regulation," Journal of Regulatory Economics, Springer, vol. 9(3), pages 227-47, May.
    4. Gasmi, Farid & Ivaldi, Marc & Laffont, Jean-Jacques, 1992. "Rent Extraction and Incentives for Efficiency in Recent Regulatory Proposals," IDEI Working Papers 21, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Michael A. Raith, 1993. "A General Model of Information Sharing in Oligopoly," STICERD - Theoretical Economics Paper Series 260, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Van Zandt, Timothy & Vives, Xavier, 2003. "Monotone Equilibria in Bayesian Games of Strategic Complementarities," CEPR Discussion Papers 4103, C.E.P.R. Discussion Papers.
    7. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
    8. Jos Jansen, 2008. "Information Acquisition and Strategic Disclosure in Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 113-148, 03.
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