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Killing the goose that may have laid the golden egg? The incentives to discriminate and the regulation of access charges in the German electricity supply industry

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  • Schmidtchen, Dieter
  • Bier, Christoph
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    Abstract

    In dem Paper wird untersucht, wann ein vertikal integrierter Netzbetreiber einen Anreiz hat, durch Fordern hoher Netznutzungsentgelte Wettbewerber vom Strommarkt fernzuhalten (Preisstrukturmißbrauch). Es wird als kontraintuitives Ergebnis abgeleitet, daß ein Kostennachteil des Netzbetreibers diesen nicht zu Abschreckungsmaßnahmen veranlaßt, sondern ihn zur Förderung des Markteintritts eines Rivalen und zum Rückzug aus dem Markt bewegt. Im Falle eines Kostenvorteils des vertikal integrierten Netzbetreibers oder bei Kostengleichheit bestimmt die Preisdynamik im Strommarkt, ob der Netzbetreiber den Marktzutritt abschreckt oder sich aus der Versorgung des Marktes zurückzieht. Das Paper enthält auch eine Wohlfahrtsanalyse der Marktergebnisse ohne und mit Regulierung von Netzzugangsentgelten, und es zeigt, daß eine Regulierung des Netzzutrittsentgelts den Netzbetreiber zur Sabotage (Nicht-Preisdiskriminierung) anregt. -- The purpose of the paper is (1) to analyze the potential and the incentives for a vertically integrated input monopolist to engage in price-discrimination when there is downstream entry, and (2) to examine the question, whether a cost-based regulation of access charges for electricity grids enhances competition in the downstream-market. The paper shows that the incumbent will never block entry if the entrant is more efficient than the incumbent. The reason is that the input-monopolist can make more profit through input sales than it could generate by producing the downstream product itself. If the entrant does not have a cost advantage either the incumbent or the entrant gets a monopoly position. Providing for a level playing field by means of a cost-based regulation of access charges always creates competition in the downstream-market. The paper also derives the welfare effects of both the liberalization of the downstream-market and the cost-based regulation.

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    Bibliographic Info

    Paper provided by Saarland University, CSLE - Center for the Study of Law and Economics in its series CSLE Discussion Paper Series with number 2005-07.

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    Date of creation: 2005
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    Handle: RePEc:zbw:csledp:200507

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    Related research

    Keywords: discrimination; regulation; vertical integration; electricity; access charges; sabotage;

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    References

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    1. Gert Brunekreeft, 2002. "Regulation and Third-Party Discrimination in the German Electricity Supply Industry," European Journal of Law and Economics, Springer, vol. 13(3), pages 203-220, May.
    2. Susanne Bonomo & Massimo Filippini & Peter Zweifel, 1998. "Neue Aufschluesse ueber die Elektrizitaetsnachfrage der schweizerischen Haushalte," SOI - Working Papers 9801, Socioeconomic Institute - University of Zurich.
    3. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-50, June.
    4. Mandy, David M, 2000. "Killing the Goose That May Have Laid the Golden Egg: Only the Data Know Whether Sabotage Pays," Journal of Regulatory Economics, Springer, vol. 17(2), pages 157-72, March.
    5. Stefan Buehler, 2005. "The Promise and Pitfalls of Restructuring Network Industries," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 205-228, 05.
    6. 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.
    7. Chen, Yongmin, 2001. "On Vertical Mergers and Their Competitive Effects," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 667-85, Winter.
    8. Weisman, Dennis L & Kang, Jaesung, 2001. "Incentives for Discrimination when Upstream Monopolists Participate in Downstream Markets," Journal of Regulatory Economics, Springer, vol. 20(2), pages 125-39, September.
    9. Silk, Julian I. & Joutz, Frederick L., 1997. "Short and long-run elasticities in US residential electricity demand: a co-integration approach," Energy Economics, Elsevier, vol. 19(4), pages 493-513, October.
    10. Song, Jae-Do & Kim, Jae-Cheol, 2001. "Strategic Reaction of Vertically Integrated Firms to Downstream Entry: Deterrence or Accommodation," Journal of Regulatory Economics, Springer, vol. 19(2), pages 183-99, March.
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