Vertical integration, separation and non-price discrimination: An empirical analysis of German electricity markets for residential customers
AbstractThe literature on vertical integration in markets with regulated upstream prices suggests that the integrated upstream firm might engage in non-price discrimination. Several studies provide policy recommendations derived either from case study approaches or based on theoretical modeling which addresses the unbundling issue. In this study we analyze the impact of vertical integration of retail incumbent and network operator on retail prices and upstream charges. As the vertical structure is heterogeneous across the 850 German electricity submarkets for residential customers (there exist legally unbundled, vertically integrated or fully separated firms), we use firm level data to analyze the effects of different vertical structures and regulation schemes on retail electricity prices. We find significantly higher prices in markets with vertically integrated firms compared to markets with fully separated firms. This finding could indicate non-price discrimination. Furthermore, we find no evidence that legal unbundling eliminates the incentives for non-price discrimination because the prices do not differ from prices in markets under vertical integration. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-069.
Date of creation: 2011
Date of revision:
electricity; regulation; vertical integration; legal and total unbundling; non-price discrimination;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L5 - Industrial Organization - - Regulation and Industrial Policy
- L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-COM-2012-02-20 (Industrial Competition)
- NEP-ENE-2012-02-20 (Energy Economics)
- NEP-IND-2012-02-20 (Industrial Organization)
- NEP-REG-2012-02-20 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nillesen, P. & Pollitt, M.G., 2008.
"Ownership unbundling in electricity distribution: empircal evidence from New Zealand,"
Cambridge Working Papers in Economics
0836, Faculty of Economics, University of Cambridge.
- Paul Nillesen & Michael Pollitt, 2011. "Ownership Unbundling in Electricity Distribution: Empirical Evidence from New Zealand," Review of Industrial Organization, Springer, vol. 38(1), pages 61-93, January.
- John Kwoka, 2005. "Electric power distribution: economies of scale, mergers, and restructuring," Applied Economics, Taylor & Francis Journals, vol. 37(20), pages 2373-2386.
- Evens Salies, 2006.
"Mergers in the GB Electricity Market: Effects on Retail Charges,"
Sciences Po publications
2006-8, Sciences Po.
- Evens Salies, 2008. "Mergers in the GB electricity market: effects on retail charges," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1483-1490.
- Evens Salies, 2006. "Mergers in the GB electricity market: effects on retail charges," Documents de Travail de l'OFCE 2006-08, Observatoire Francais des Conjonctures Economiques (OFCE).
- Höffler, Felix & Kranz, Sebastian, 2011. "Legal unbundling can be a golden mean between vertical integration and ownership separation," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 576-588, September.
- David Mandy & David E. M. Sappington, 2004.
"Incentives for Sabotage in Vertically Related Industries,"
0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
- David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
- Paul Nillesen & Michael Pollitt, 2007. "The 2001-3 electricity distribution price control review in the Netherlands: regulatory process and consumer welfare," Journal of Regulatory Economics, Springer, vol. 31(3), pages 261-287, June.
- Beard, T Randolph & Kaserman, David L & Mayo, John W, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-33, September.
- Lee, Sang Hyup & Hamilton, Jonathan H, 1999. "Using Market Structure to Regulate a Vertically Integrated Monopolist," Journal of Regulatory Economics, Springer, vol. 15(3), pages 223-48, May.
- Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
- Christian Growitsch & Tooraj Jamasb & Michael Pollitt, 2009.
"Quality of service, efficiency and scale in network industries: an analysis of European electricity distribution,"
Taylor & Francis Journals, vol. 41(20), pages 2555-2570.
- Christian Growitsch & Jamasb, T. & Pollitt, M., 2005. "Quality of Service, Efficiency and Scale in Network Industries: An analysis of European electricity distribution," Cambridge Working Papers in Economics 0538, Faculty of Economics, University of Cambridge.
- Christian Growitsch & T. Jamasb & M. Pollitt, 2005. "Quality of Service, Efficiency, and Scale in Network Industries: An Analysis of European Electricity Distribution," IWH Discussion Papers 3, Halle Institute for Economic Research.
- Pollitt, Michael, 2008.
"The arguments for and against ownership unbundling of energy transmission networks,"
Elsevier, vol. 36(2), pages 704-713, February.
- Pollitt, M., 2007. "The arguments for and against ownership unbundling of energy transmission networks," Cambridge Working Papers in Economics 0737, Faculty of Economics, University of Cambridge.
- Cremer, Helmuth & Crémer, Jacques & De Donder, Philippe, 2006.
"Legal vs Ownership Unbundling in Network Industries,"
CEPR Discussion Papers
5767, C.E.P.R. Discussion Papers.
- Cremer, Helmuth & Crémer, Jacques & De Donder, Philippe, 2006. "Legal vs Ownership Unbundling in Network Industries," IDEI Working Papers 405, Institut d'Économie Industrielle (IDEI), Toulouse.
- Felix Höffler & Sebastian Kranz, 2011.
"Imperfect legal unbundling of monopolistic bottlenecks,"
Journal of Regulatory Economics,
Springer, vol. 39(3), pages 273-292, June.
- Felix Höffler & Sebastian Kranz, 2007. "Imperfect Legal Unbundling of Monopolistic Bottlenecks," Bonn Econ Discussion Papers bgse16_2007, University of Bonn, Germany.
- David Sappington, 2006. "On the Merits of Vertical Divestiture," Review of Industrial Organization, Springer, vol. 29(3), pages 171-191, November.
- Michael Crew & Anthony Heyes, 2005. "Introduction: Environmental Regulation," Journal of Regulatory Economics, Springer, vol. 28(2), pages 127-128, 09.
- Faye Steiner, 2001. "Regulation, industry structure and performance in the electricity supply industry," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 143-182.
- Nemoto, Jiro & Goto, Mika, 2004. "Technological externalities and economies of vertical integration in the electric utility industry," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 67-81, January.
- Vickers, John, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 1-17, January.
- Bolle, Friedel & Breitmoser, Yves, 2006. "On the Allocative Efficiency of Ownership Unbundling," Discussion Papers 255, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
- Weisman, Dennis L, 1995. "Regulation and the Vertically Integrated Firm: The Case of RBOC Entry into Interlata Long Distance," Journal of Regulatory Economics, Springer, vol. 8(3), pages 249-66, November.
- Massimiliano Piacenza & Davide Vannoni, 2009. "Vertical And Horizontal Economies In The Electric Utility Industry: An Integrated Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 431-450, 09.
- Claire Bergaentzlé, 2012. "Particularités d'adoption des compteurs intelligents au Royaume-Uni et en Allemagne : entre marchés de comptage libéralisé et règles à mettre en place pour un réel smart grid intégré," Post-Print halshs-00793322, HAL.
- Nikogosian, Vigen & Weigand, Jürgen, 2012. "Forward integration and market entry: Evidence from natural gas markets for household customers in Germany," ZEW Discussion Papers 12-062, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Jean-Michel Glachant & Sophia Ruester, 2013. "The EU Internal Electricity Market: Done Forever?," RSCAS Working Papers 2013/66, European University Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.