IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v6y2004i4p541-555.html

Pricing Access to a Monopoly Input

Author

Listed:
  • David S. Sibley
  • Michael J. Doane
  • Michael A. Williams
  • Shu‐Yi Tsai

Abstract

What price should downstream entrants pay a vertically integrated incumbent monopoly for use of its assets? Courts, legislators, and regulators have at times mandated that incumbent monopolies lease assets required for the production of a retail service to entrants in efforts to increase the competitiveness of retail markets. This paper compares two rules for pricing such monopoly inputs: marginal cost pricing (MCP) and generalized efficient component pricing rule (GECPR). The GECPR is not a fixed price, but is a rule that determines the input price to be paid by the entrant from the entrant's retail price. Comparing the retail market equilibrium under MCP and GECPR, the GECPR leads to lower equilibrium retail prices. If the incumbent is less efficient than the entrant, the GECPR also leads to lower production costs than does the MCP rule. If the incumbent is more efficient than the entrant, however, conditions may exist in which MCP leads to lower production costs than does the GECPR. The analysis is carried out assuming either Bertrand competition, quantity competition, or monopolistic competition between the incumbent and entrant in the downstream market.

Suggested Citation

  • David S. Sibley & Michael J. Doane & Michael A. Williams & Shu‐Yi Tsai, 2004. "Pricing Access to a Monopoly Input," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 541-555, October.
    • Handle: RePEc:bla:jpbect:v:6:y:2004:i:4:p:541-555
    DOI: 10.1111/j.1467-9779.2004.00179.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9779.2004.00179.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9779.2004.00179.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Spulber, Daniel F & Sidak, J Gregory, 1997. "Network Access Pricing and Deregulation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 6(4), pages 757-782, December.
    2. Panzar, J. C. & Sibley, D. S., 1989. "Optimal two-part tariffs for inputs : The case of imperfect competition," Journal of Public Economics, Elsevier, vol. 40(2), pages 237-249, November.
    3. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    4. Simon, Leo K & Stinchcombe, Maxwell B, 1995. "Equilibrium Refinement for Infinite Normal-Form Games," Econometrica, Econometric Society, vol. 63(6), pages 1421-1443, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Doh‐Shin Jeon & Sjaak Hurkens, 2008. "A retail benchmarking approach to efficient two‐way access pricing: no termination‐based price discrimination†," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 822-849, September.
    2. Weisman, Dennis L., 2001. "Access pricing and exclusionary behavior," Economics Letters, Elsevier, vol. 72(1), pages 121-126, July.
    3. Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs," Working Papers 07-11, NET Institute, revised Sep 2007.
    4. Sue Mialon, 2007. "Pricing access in network competition," Journal of Regulatory Economics, Springer, vol. 31(1), pages 109-123, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sue Mialon, 2007. "Pricing access in network competition," Journal of Regulatory Economics, Springer, vol. 31(1), pages 109-123, February.
    2. Valletti, Tommaso, 1998. "Two-part access pricing and imperfect competition," Information Economics and Policy, Elsevier, vol. 10(3), pages 305-323, September.
    3. Riechmann, Christoph, 2000. "Strategic pricing of grid access under partial price-caps -- electricity distribution in England and Wales," Energy Economics, Elsevier, vol. 22(2), pages 187-207, April.
    4. Demetrius Yannelis, 2002. "On access pricing with network externalities," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(2), pages 186-190, June.
    5. Oriol Carbonell-Nicolau & Richard McLean, 2013. "Approximation results for discontinuous games with an application to equilibrium refinement," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(1), pages 1-26, September.
    6. Rious, Vincent & Glachant, Jean-Michel & Perez, Yannick & Dessante, Philippe, 2008. "The diversity of design of TSOs," Energy Policy, Elsevier, vol. 36(9), pages 3323-3332, September.
    7. Dennis Weisman, 2014. "Safe harbor input prices and market exclusion," Journal of Regulatory Economics, Springer, vol. 46(2), pages 226-236, October.
    8. Ku, Hyeon-Mo & Kim, Jae-Cheol, 1998. "Non-discriminatory access pricing for multiple entrants," International Review of Economics & Finance, Elsevier, vol. 7(2), pages 173-183.
    9. Lewis, Tracy R. & Sappington, David E. M., 1999. "Access pricing with unregulated downstream competition," Information Economics and Policy, Elsevier, vol. 11(1), pages 73-100, March.
    10. Kopsakangas-Savolainen, Maria, 2004. "The welfare effects of different pricing schemes for electricity distribution in Finland," Energy Policy, Elsevier, vol. 32(12), pages 1429-1435, August.
    11. Tilman Klumpp & Xuejuan Su, 2015. "Strategic Investment under Open Access: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 63(3), pages 495-521, September.
    12. Carlo Cambini, 2000. "Competition between Vertically Integrated Networks: a Generalized Model," ICER Working Papers 01-2000, ICER - International Centre for Economic Research.
    13. Michael Greinecker & Martin Meier & Konrad Podczeck, 2026. "Sequential Equilibria in a Class of Infinite Extensive Form Games," Papers 2604.25784, arXiv.org.
    14. Yun, Kyoung-Lim & Choi, Hyun-Woo & Ahn, Byong-Hun, 1997. "The accounting revenue division in international telecommunications: Conflicts and inefficiencies," Information Economics and Policy, Elsevier, vol. 9(1), pages 71-92, March.
    15. repec:eid:wpaper:58137 is not listed on IDEAS
    16. Soheil R. Nadimi & Dennis L. Weisman, 2014. "Nonexclusionary input prices," Applied Economics Letters, Taylor & Francis Journals, vol. 21(11), pages 727-732, July.
    17. Bickenbach, Frank, 1999. "Regulierung und Wettbewerb im Bereich der Netzinfrastrukturen: Begründung, Regeln und Institutionen," Kiel Working Papers 910, Kiel Institute for the World Economy.
    18. Joan Calzada, 2009. "Access charges under two-tier pricing," Journal of Regulatory Economics, Springer, vol. 35(3), pages 296-311, June.
    19. Parker, David, 2001. "Economic Regulation: A Preliminary Literature Review and Summary of Research Questions Arising," Centre on Regulation and Competition (CRC) Working papers 30616, University of Manchester, Institute for Development Policy and Management (IDPM).
    20. Philippe Bich, 2016. "Prudent Equilibria and Strategic Uncertainty in Discontinuous Games," Working Papers halshs-01337293, HAL.
    21. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:6:y:2004:i:4:p:541-555. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/apettea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.