IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v32y2001i2p302-15.html
   My bibliography  Save this article

Downstream Integration by a Bottleneck Input Supplier Whose Regulated Wholesale Prices Are Above Costs

Author

Listed:
  • Biglaiser, Gary
  • DeGraba, Patrick

Abstract

We examine the consequences of allowing a bottleneck input supplier to vertically integrate downstream and compete with users of the input when the input has a regulated price above cost. If the supplier maximizes the sum of short-run profits from the downstream market and input market, then allowing the vertical integration will increase social surplus, even if it causes sellers of competing differentiated products to exit the market. If the bottleneck supplier wishes to engage in predatory pricing, increasing the regulated price of the input above cost reduces the incentive to engage in predation. These questions are motivated primarily by assertions made in the public record that allowing Bell Operating Companies into long distance can be harmful if access rates are above cost. Copyright 2001 by the RAND Corporation.

Suggested Citation

  • Biglaiser, Gary & DeGraba, Patrick, 2001. "Downstream Integration by a Bottleneck Input Supplier Whose Regulated Wholesale Prices Are Above Costs," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 302-315, Summer.
  • Handle: RePEc:rje:randje:v:32:y:2001:i:2:p:302-15
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Duarte Brito & Pedro Pereira & João Vareda, 2008. "Incentives to Invest and to Give Access to Non-Regulated Next Generation Networks," Working Papers 35, Portuguese Competition Authority.
    2. Fabian Bergès & Claire Chambolle, 2009. "Threat of Exit as a Source of Bargaining Power," Recherches économiques de Louvain, De Boeck Université, vol. 75(3), pages 353-368.
    3. Brito Duarte & Pereira Pedro & Vareda João, 2012. "Does Vertical Separation Necessarily Reduce Quality Discrimination and Increase Welfare?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-44, November.
    4. Kenneth Fjell & Øystein Foros & Debashis Pal, 2010. "Endogenous Average Cost Based Access Pricing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 149-162, March.
    5. Briglauer Wolfgang & Götz Georg & Schwarz Anton, 2011. "Margin Squeeze in Fixed-Network Telephony Markets -- Competitive or Anticompetitive?," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-21, December.
    6. Jan Bouckaert & Frank Verboven, 2004. "Price Squeezes in a Regulatory Environment," Journal of Regulatory Economics, Springer, vol. 26(3), pages 321-351, August.
    7. Brito, Duarte & Pereira, Pedro & Vareda, João, 2012. "Incentives to invest and to give access to non-regulated new technologies," Information Economics and Policy, Elsevier, vol. 24(3), pages 197-211.
    8. Brito, Duarte & Pereira, Pedro, 2009. "Product differentiation when competing with the suppliers of bottleneck inputs," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 43-53, January.
    9. Fernando Coloma & Juan-Pablo Montero, 2009. "Escalamiento de cargos de acceso e incentivos a la predación de un operador de telefonía local integrado verticalmente," Documentos de Trabajo 361, Instituto de Economia. Pontificia Universidad Católica de Chile..
    10. Silvester Koten, 2013. "Legal unbundling and auctions in vertically integrated (utilities) markets," European Journal of Law and Economics, Springer, vol. 36(3), pages 543-573, December.
    11. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    12. Roman Inderst & Tommaso Valletti, 2009. "Price discrimination in input markets," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 1-19.
    13. Gaudiny, Germain & Saavedra Valenzuela, Claudia, 2012. "Ex-ante margin squeeze tests in the telecommunications industry: What is a reasonable efficient operator? (Revised: December 20, 2012)," 23rd European Regional ITS Conference, Vienna 2012 67955, International Telecommunications Society (ITS).
    14. Aldo González Tissinetti, 2006. "Antitrust and Regulation, Complements or Substitutes? The Case of a Vertically Integrated Firm," Working Papers wp225, University of Chile, Department of Economics.
    15. Brito, Duarte & Pereira, Pedro & Vareda, João, 2010. "Can two-part tariffs promote efficient investment on next generation networks?," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 323-333, May.
    16. 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.
    17. Gaudin, Germain & Saavedra, Claudia, 2014. "Ex ante margin squeeze tests in the telecommunications industry: What is a reasonably efficient operator?," Telecommunications Policy, Elsevier, vol. 38(2), pages 157-172.
    18. Øystein Foros & Hans Kind & Lars Sørgard, 2007. "Managerial incentives and access price regulation," European Journal of Law and Economics, Springer, vol. 23(2), pages 117-133, April.
    19. Arya, Anil & Mittendorf, Brian & Sappington, David E.M., 2008. "Outsourcing, vertical integration, and price vs. quantity competition," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 1-16, January.

    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:rje:randje:v:32:y:2001:i:2:p:302-15. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: https://www.rje.org .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.