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Access Price Cap Mechanisms and Industry Structure with Information Acquisition

Author

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  • Francesca Stroffolini

    () (Università di Napoli "Federico II")

Abstract

This paper tackles the issue of the welfare desirability of downstream integration versus separation when facing the problem of socially valuable information acquisition on the upstream cost in regulated network industries. I consider an upstream natural monopoly with cost uncertainty, regulated through an access price cap mechanism, and a downstream unregulated Cournot competition. Cost information improves the performance of the regulatory mechanism but it can only be acquired by the monopolist; the information acquisition is unobservable. I show that the access price cap mechanism provides a vertically integrated firm with greater incentives to acquire information and this favours integration.

Suggested Citation

  • Francesca Stroffolini, 2009. "Access Price Cap Mechanisms and Industry Structure with Information Acquisition," Rivista di Politica Economica, SIPI Spa, issue 1, pages 209-247, January-M.
  • Handle: RePEc:rpo:ripoec:y:2009:i:1:p:209-247
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    More about this item

    Keywords

    access price cap mechanisms; integration; separation; information acquisition;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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