This paper analyzes the equilibrium outcomes in a network industry under different vertical market structures. In this industry, an upstream monopolist operates a network used as an input to produce horizontally differentiated final products that are imperfect substitutes. Three potential drawbacks of market structure regulation are analyzed: (i) double marginalization, (ii) underinvestment, and (iii) vertical foreclosure. We explore the conditions under which these effects emerge and discuss when the breakup of an integrated network monopolist is adequate.
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Publisher Info
Paper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number
0102.
Length: 35 pages Date of creation: Jul 2001 Date of revision: Publication status: Published in German Economic Review 6(2), 2005, pages 205-228 Handle: RePEc:soz:wpaper:0102
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
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