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Regulation and Access Pricing with Asymmetric Information

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  • Gianni De Fraja

Abstract

We study in this paper whether the price charged to a competitor for the use of an essential input produced in conditions of natural monopoly should reflect only considerations of relative efficiency between the various potential suppliers. In a model that captures the technological conditions operating in industries such as telephony, gas, rail, where access to a distribution network is essential to the ability to compete, we show that this is not the case. Instead, the access price should be set `pro-competitively': it may be socially optimal to award production to a firm less efficient than the owner of the network.

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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 95/5.

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Handle: RePEc:yor:yorken:95/5

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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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References

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  1. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-30, July.
  3. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Price, Catherine, 1994. "Transportation charges in the gas industry," Utilities Policy, Elsevier, vol. 4(3), pages 191-197, July.
  5. J-J. Laffont & J. Tirole, 1994. "Access Pricing and Competition," Working papers 95-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Vagliasindi, M. & Waterson, M., 1995. "New Insights on the Interactions Between Regulation and Competition in Vertically Related Markets," The Warwick Economics Research Paper Series (TWERPS) 438, University of Warwick, Department of Economics.
  7. Laffont, Jean-Jacques & Tirole, Jean, 1990. "Optimal Bypass and Cream Skimming," American Economic Review, American Economic Association, vol. 80(5), pages 1042-61, December.
  8. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-56, November.
  9. Caillaud, Bernard, 1990. "Regulation, competition, and asymmetric information," Journal of Economic Theory, Elsevier, vol. 52(1), pages 87-110, October.
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Citations

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Cited by:
  1. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  2. Grout, Paul A. & Park, In-Uck, 2004. "Promoting competition in the presence of essential facilities," International Journal of Industrial Organization, Elsevier, vol. 22(10), pages 1415-1441, December.
  3. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June.
  4. Joan Calzada, 2006. "Worksharing and Access Discounts in the Postal Sector with Asymmetric Information," Journal of Regulatory Economics, Springer, vol. 29(1), pages 69-102, 01.
  5. Lommerud, Kjell Erik & Sørgard, Lars, 2002. "Entry in Telecommunication: Customer Loyalty, Price Sensitivity and Access Prices," Working Papers in Economics 14/02, University of Bergen, Department of Economics.
  6. Joyce Sadka & Jose L. Negrin, 2004. "Full vs. Light-Handed Regulation of a Network Industry," Working Papers 0403, Centro de Investigacion Economica, ITAM.
  7. Bier, Christoph & Schmidtchen, Dieter, 2006. "Regulierung in vertikal verknüpften Märkten: Maximieren diskriminierungsfreie kostenorientierte Netznutzungsentgelte die gesellschaftliche Wohlfahrt?," CSLE Discussion Paper Series 2006-02, Saarland University, CSLE - Center for the Study of Law and Economics.
  8. Christoph Bier & Dieter Schmidtchen, . "Regulierung in vertikal verknüpften Märkten: Maximieren diskriminierungsfreie kostenorientierte Netznutzungsentgelte die gesellschaftliche Wohlfahrt?," German Working Papers in Law and Economics 2006-1-1138, Berkeley Electronic Press.
  9. Mumcu, Ayşe & Oğur, Serhan & Zenginobuz, Unal, 2001. "Competition between regulated and non-regulated generators on electric power networks," MPRA Paper 376, University Library of Munich, Germany.
  10. Raineri, Ricardo & Giaconi, Pablo, 2005. "Price and access charge discrimination in electricity distribution: An application to the Chilean case," Energy Economics, Elsevier, vol. 27(5), pages 771-790, September.
  11. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
  12. Joyce Sadka. Jose Luis Negrin, 2004. "Full vs. Light-Handed Regulation of a Network Industry," Econometric Society 2004 Latin American Meetings 257, Econometric Society.
  13. Wirl, Franz, 2011. "Taxing incumbent monopoly to foster entry," Energy Economics, Elsevier, vol. 33(3), pages 388-398, May.

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