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Regulation in Vertically-Related Industries: Myths, Facts, and Policy

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  • David Sappington

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Abstract

This paper explains why conclusions that appear to be “facts” can truly be “myths” in industries like today’s telecommunications industry, where key suppliers operate in multiple vertical stages of production. The paper explains, for example, why an entrant’s decision to make or buy critical production inputs may be largely insensitive to the price of these inputs. It also reviews why a vertically-integrated producer (VIP) may prefer to assist, rather than disadvantage, retail rivals, and why a VIP may be disadvantaging rivals even when it provides them with the same wholesale service quality that it provides to its own retail affiliate. Copyright Springer 2006

Suggested Citation

  • David Sappington, 2006. "Regulation in Vertically-Related Industries: Myths, Facts, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(1), pages 3-16, February.
  • Handle: RePEc:kap:revind:v:28:y:2006:i:1:p:3-16
    DOI: 10.1007/s11151-006-0005-9
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    File URL: http://hdl.handle.net/10.1007/s11151-006-0005-9
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    References listed on IDEAS

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    1. David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
    2. Author One David Harbord & Author Two Marco Ottaviani, 2002. "Anticompetitive Contracts in the U.K. Pay-TV Market," Industrial Organization 0203002, EconWPA.
    3. Gilbert, Richard J & Riordan, Michael H, 2005. "Product Improvement and Technological Tying in a Winner-Take-All Market," Competition Policy Center, Working Paper Series qt3v04b2rx, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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    Citations

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    Cited by:

    1. Elisabetta Iossa & Francesca Stroffolini, 2012. "Vertical Integration and Costly Demand Information in Regulated Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 249-271, June.
    2. Inderst, Roman & Peitz, Martin, 2012. "Network investment, access and competition," Telecommunications Policy, Elsevier, vol. 36(5), pages 407-418.
    3. Inderst, Roman & Peitz, Martin, 2011. "Netzzugang, Wettbewerb und Investitionen," ZEW Discussion Papers 11-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Polemis, Michael & Eleftheriou, Konstantinos, 2015. "To Regulate or to Deregulate? The Role of Downstream Competition in Upstream Monopoly Vertically Linked Markets," MPRA Paper 68726, University Library of Munich, Germany.
    5. Madden, Gary & Bohlin, Erik & Ahmad, Hasnat & Tran, Thien, 2013. "OECD unbundled local loop pricing," Telecommunications Policy, Elsevier, vol. 37(11), pages 1033-1045.
    6. Montolio Daniel & Trillas Francesc & Trujillo-Baute Elisa, 2014. "Regulatory Environment and Firm Performance in EU Telecommunications Services," Review of Network Economics, De Gruyter, vol. 13(3), pages 271-302, September.
    7. Galetovic Alexander & Sanhueza Ricardo, 2009. "Vertical Mergers and Competition with a Regulated Bottleneck Monopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-20, October.
    8. 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.

    More about this item

    Keywords

    regulatory policy; vertically-related industries; myths vs. facts; L51; L43; L22;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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