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Local versus global price cap: A comparison of foreclosure incentives

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  • Brunekreeft, Gert

Abstract

This paper compares two regulatory devices for handling (access to) bottlenecks in deregulated network industries: (1) a local price cap and (2) a global price cap, the latter of which applies the efficient component pricing rule. The local price cap restricts profit regulation to the bottleneck, whereas a complementary set of measures intends to curb the resulting incentives for foreclosure of the competitive markets. The global price cap extends regulation to the entire firm, which should take away the foreclosure incentives. This major advantage of the global price cap is contrasted to possible disadvantages, which centre around renewed foreclosure incentives.

Suggested Citation

  • Brunekreeft, Gert, 1997. "Local versus global price cap: A comparison of foreclosure incentives," Discussion Papers 36, University of Freiburg, Institute for Transport Economics and Regional Policy.
    • Handle: RePEc:zbw:aluivr:36
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    References listed on IDEAS

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    1. Knieps, Gunter, 1997. "Phasing Out Sector-Specific Regulation in Competitive Telecommunications," Kyklos, Wiley Blackwell, vol. 50(3), pages 325-339.
    2. Günter Knieps, 1995. "Standardization: The Evolution of Institutions versus Government Intervention," Palgrave Macmillan Books, in: Lüder Gerken (ed.), Competition among Institutions, chapter 11, pages 283-296, Palgrave Macmillan.
    3. Brunekreeft, Gert, 1997. "Open access vs. common carriage in electricity supply," Energy Economics, Elsevier, vol. 19(2), pages 225-238, May.
    4. G³nter Knieps, 1997. "The Concept of Open Network Provision in Large Technical Systems," Homo Oeconomicus, Institute of SocioEconomics, vol. 14, pages 357-369.
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    Cited by:

    1. Brunekreeft, Gert & Keller, Katja, 2000. "The electricity supply industry in Germany: market power or power of the market?," Utilities Policy, Elsevier, vol. 9(1), pages 15-29, March.

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    More about this item

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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