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Welfare effects of vertical integration in energy distribution

  • Mark Lijesen

This paper analyses the welfare effects of vertical integration of networks and trade in energy markets. Vertical integration reduces the effect of double marginalisation, thus increasing welfare. On the other hand, vertical integration hinders equal competition, rendering the vertically integrated supplier a competitive advantage. We find that the net effect of vertical integration is beneficial to welfare if firms are symmetric, but the effect is ambiguous in the probably more relevant situation where the non-network firm has a cost advantage.

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File URL: http://www.cpb.nl/sites/default/files/publicaties/download/memo43.pdf
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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Memorandum with number 43.

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Date of creation: Jul 2002
Date of revision:
Handle: RePEc:cpb:memodm:43
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  1. Schmalensee, Richard., 1980. "Monopolistic two-part pricing arrangements," Working papers 1105-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. repec:cup:cbooks:9780521808378 is not listed on IDEAS
  3. Harrison, M. & Kline, J.J., 1998. "Quantity Competition With Access Fees," Papers 358, Australian National University - Department of Economics.
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