Legal Unbundling can be a Golden Mean between Vertical Integration and Separation
We study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms. Legal unbundling means that a downstream firm owns the upstream firm but this upstream firm is legally independent and maximizes its own upstream profits. We allow for non-tariff discrimination by the upstream firm and show that under quite general conditions legal unbundling yields (weakly) higher quantities in the downstream market than vertical separation and integration. Therefore, typically consumer surplus will be largest under legal unbundling. Outcomes under legal unbundling are still advantageous when we allow for discriminatory capacity investments, investments into marginal cost reduction and investments into network reliability. If access prices are unregulated, however, legal unbundling may be quite undesirable.
|Date of creation:||Nov 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Konrad, Kai A., 2001.
"Investment in the absence of property rights: the role of incumbency advantages
[Investitionsanreize bei unvollständigen Eigentumsrechten: die Rolle von Asymmetrien in Aneignungskonflikten]," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-18, Social Science Research Center Berlin (WZB).
- Konrad, Kai A., 2002. "Investment in the absence of property rights; the role of incumbency advantages," European Economic Review, Elsevier, vol. 46(8), pages 1521-1537, September.
- Kai A. Konrad, 2002. "Investment in the Absence of Property Rights: The Role of Incumbency Advantages," CESifo Working Paper Series 698, CESifo Group Munich.
- Konrad, Kai A., 2001. "Investment in the Absence of Property Rights: The Role of Incumbency Advantages," CEPR Discussion Papers 3050, C.E.P.R. Discussion Papers.
- Konrad, Kai A., 2003.
"Bidding in hierarchies
[Das Bieten in Hierarchien]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-27, Social Science Research Center Berlin (WZB).
- Roman Inderst & Holger Müller & Karl Wärneryd, 2005.
"Influence costs and hierarchy,"
Economics of Governance,
Springer, vol. 6(2), pages 177-197, 07.
- Inderst, Roman & Müller, Holger M. & Wärneryd, Karl, 2000. "Influence Costs and Hierarchy," SSE/EFI Working Paper Series in Economics and Finance 392, Stockholm School of Economics.
- Inderst, Roman & Müller, Holger M. & Wärneryd, Karl, 2000. "Influence Costs and Hierarchy," Sonderforschungsbereich 504 Publications 00-30, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Stergios Skaperdas, 1996.
"Contest success functions (*),"
Springer, vol. 7(2), pages 283-290.
- Inderst, Roman & Muller, Holger M. & Warneryd, Karl, 2007.
"Distributional conflict in organizations,"
European Economic Review,
Elsevier, vol. 51(2), pages 385-402, February.
- Ellingsen, Tore, 1997.
"Efficiency Wages and X-Inefficiencies,"
SSE/EFI Working Paper Series in Economics and Finance
180, Stockholm School of Economics.
- Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
- Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
- Muller, Holger M & Warneryd, Karl, 2001. "Inside versus Outside Ownership: A Political Theory of the Firm," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 527-41, Autumn.
When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse15_2007. 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: (BGSE Office)
If references are entirely missing, you can add them using this form.