Efficient access pricing and endogenous market structure
We analyse a (differentiated good) industry where an incumbent firm owns a network good (essential input) and faces potential competition in the (downstream) retail market. Unlike the traditional approach, we consider a scenario where the decision to compete or not in the downstream segment is endogenous, and this decision depends on the particular mechanism designed by the utilitarian regulator. We assume that the technology of the potential entrant is private information. We derive the efficient (Ramsey) prices and access charge taking the impact of a non-discriminatory mechanism on entry decision into account. We assert that the optimal pricing formula must include a Ramsey term that is inversely related to the "modified" superelasticity of the retail good under consideration. We further show, under unknown cost, that there might be "excess" or "too little" entry compared to the socially optimal level.
|Date of creation:||01 Jan 2007|
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- GAUTIER, Axel & MITRA, Manipushpak, 2003.
"Regulation of an open access essential facility,"
CORE Discussion Papers
2003084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- GAUTIER, Axel & MITRA, Manipushpak, . "Regulation of an open access essential facility," CORE Discussion Papers RP -2053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Axel Gautier & Manipushpak Mitra, 2003. "Regulation of an Open Access Essential Facility," Bonn Econ Discussion Papers bgse19_2003, University of Bonn, Germany.
- Jean-Jacques Laffont & Jean Tirole, 1994.
"Access Pricing and Competition,"
94-31, Massachusetts Institute of Technology (MIT), Department of Economics.
- J-J. Laffont & J. Tirole, 1994. "Access Pricing and Competition," Working papers 95-11, Massachusetts Institute of Technology (MIT), Department of Economics.
- Laffont, Jean-Jacques & Tirole, Jean, 1992. "Access Pricing and Competition," IDEI Working Papers 19, Institut d'Économie Industrielle (IDEI), Toulouse.
- 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.
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