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Regulation and Access Pricing with Asymmetric Information

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  • De Fraja, Gianni

Abstract

We study in this paper whether the price charged to a competitor for the use of an essential input produced in conditions of natural monopoly should reflect only considerations of relative efficiency between the various potential suppliers. In a model that captures the technological conditions operating in industries such as telephony, gas, rail, where access to a distribution network is essential to the ability to compete, we show that this is not the case. Instead, the access price should be set `pro-competitively': it may be socially optimal to award production to a firm less efficient than the owner of the network.

Suggested Citation

  • De Fraja, Gianni, 1995. "Regulation and Access Pricing with Asymmetric Information," CEPR Discussion Papers 1122, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1122
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    References listed on IDEAS

    as
    1. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
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    3. Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
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    6. Caillaud, Bernard, 1990. "Regulation, competition, and asymmetric information," Journal of Economic Theory, Elsevier, vol. 52(1), pages 87-110, October.
    7. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Laffont, Jean-Jacques & Tirole, Jean, 1990. "Optimal Bypass and Cream Skimming," American Economic Review, American Economic Association, vol. 80(5), pages 1042-1061, December.
    9. Price, Catherine, 1994. "Transportation charges in the gas industry," Utilities Policy, Elsevier, vol. 4(3), pages 191-197, July.
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    Citations

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    Cited by:

    1. Riechmann, Christoph, 2000. "Strategic pricing of grid access under partial price-caps -- electricity distribution in England and Wales," Energy Economics, Elsevier, vol. 22(2), pages 187-207, April.
    2. Lommerud, Kjell Erik & Sorgard, Lars, 2003. "Entry in telecommunication: customer loyalty, price sensitivity and access prices," Information Economics and Policy, Elsevier, vol. 15(1), pages 55-72, March.
    3. Axel Gautier & Manipushpak Mitra, 2008. "Regulation of an Open Access Essential Facility," Economica, London School of Economics and Political Science, vol. 75(300), pages 662-682, November.
    4. Joyce Sadka & Jose L. Negrin, 2004. "Full vs. Light-Handed Regulation of a Network Industry," Working Papers 0403, Centro de Investigacion Economica, ITAM.
    5. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June.
    6. Bier, Christoph & Schmidtchen, Dieter, 2006. "Regulierung in vertikal verknüpften Märkten: Maximieren diskriminierungsfreie kostenorientierte Netznutzungsentgelte die gesellschaftliche Wohlfahrt?," CSLE Discussion Paper Series 2006-02, Saarland University, CSLE - Center for the Study of Law and Economics.
    7. Grout, Paul A. & Park, In-Uck, 2004. "Promoting competition in the presence of essential facilities," International Journal of Industrial Organization, Elsevier, vol. 22(10), pages 1415-1441, December.
    8. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    9. Joan Calzada, 2006. "Worksharing and Access Discounts in the Postal Sector with Asymmetric Information," Journal of Regulatory Economics, Springer, vol. 29(1), pages 69-102, January.
    10. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    11. Joyce Sadka. Jose Luis Negrin, 2004. "Full vs. Light-Handed Regulation of a Network Industry," Econometric Society 2004 Latin American Meetings 257, Econometric Society.
    12. Chi-Ting Chin, 2014. "The Growth and Welfare Effects of Vertical Separation versus Vertical Integration," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 10(2), pages 117-127, July.
    13. Raineri, Ricardo & Giaconi, Pablo, 2005. "Price and access charge discrimination in electricity distribution: An application to the Chilean case," Energy Economics, Elsevier, vol. 27(5), pages 771-790, September.
    14. Christoph Bier & Dieter Schmidtchen, "undated". "Regulierung in vertikal verknüpften Märkten: Maximieren diskriminierungsfreie kostenorientierte Netznutzungsentgelte die gesellschaftliche Wohlfahrt?," German Working Papers in Law and Economics 2006-1-1138, Berkeley Electronic Press.
    15. Wirl, Franz, 2011. "Taxing incumbent monopoly to foster entry," Energy Economics, Elsevier, vol. 33(3), pages 388-398, May.
    16. Mumcu, Ayşe & Oğur, Serhan & Zenginobuz, Unal, 2001. "Competition between regulated and non-regulated generators on electric power networks," MPRA Paper 376, University Library of Munich, Germany.

    More about this item

    Keywords

    Access; Competition in Regulated Markets; Network; Regulation;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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