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Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry

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  • Reiffen, David
  • Schumann, Laurence
  • Ward, Michael R

Abstract

One concern about regulated monopolies entering unregulated vertically-related markets is that they will discriminate against competitors of their unregulated affiliates. However, prohibiting regulated monopolies from offering related goods may preclude production by the most efficient provider. We take advantage of variation across geographic cellular phone markets in the US to examine the effect of integration on output, quality and prices. We find some evidence consistent with efficiencies (greater concentration of lines to users is associated with greater output and higher quality) and some consistent with discrimination (greater interconnection facility ownership concentration is associated with lower output and quality). Copyright 2000 by Blackwell Publishing Ltd

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  • Reiffen, David & Schumann, Laurence & Ward, Michael R, 2000. "Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 253-286, September.
  • Handle: RePEc:bla:jindec:v:48:y:2000:i:3:p:253-86
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    Cited by:

    1. Mandy, David M. & Mayo, John W. & Sappington, David E.M., 2016. "Targeting efforts to raise rivals' costs: Moving from “Whether” to “Whom”," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 1-15.
    2. Bose, Arup & Pal, Debashis & Sappington, David E.M., 2017. "Pricing to preclude sabotage in regulated industries," International Journal of Industrial Organization, Elsevier, vol. 51(C), pages 162-184.
    3. 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.
    4. Chen-Ju Lin & Ci-Rong Li & Chih-Peng Chu, 2011. "The effects of applying a hybrid method with a macro–micro approach for market research in the telecommunication industry," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(4), pages 829-843, June.
    5. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    6. Bustos Alvaro E & Galetovic Alexander, 2009. "Vertical Integration and Sabotage with a Regulated Bottleneck Monopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-52, September.
    7. David Sappington, 2006. "On the Merits of Vertical Divestiture," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 171-191, November.
    8. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    9. Russell Pittman, 2001. "Vertical Restructuring of the Infrastructure Sectors of Transition Economies," Industrial Organization 0111002, EconWPA.
    10. Joshua S. Gans & Stephen P. King & Julian Wright, 2005. "Wireless Communications," Monash Economics Working Papers archive-45, Monash University, Department of Economics.
    11. Brunekreeft, Gert, 2001. "Regulation and third-party discrimination in vertically related markets: The case of German electricity," Discussion Papers 74 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
    12. Paul Zimmerman, 2008. "Strategic incentives under vertical integration: the case of wireline-affiliated wireless carriers and intermodal competition in the US," Journal of Regulatory Economics, Springer, vol. 34(3), pages 282-298, December.

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