Vertical Integration and Costly Demand Information in Regulated Network Industries
We study how vertical integration in regulated network industries affects the acquisition and transmission of socially valuable information on demand. We consider a regulated upstream monopoly with downstream unregulated Cournot competition and demand uncertainty. Demand information serves to set the access price and to foster competition in the unregulated segment but demand realizations can be observed at some cost only by the upstream monopolist; information acquisition is also unobservable. We show that vertical integration favours acquisition of demand information because of the transmission of information generated by the public nature of the regulatory mechanism. This holds both when access to information is easier for the upstream firm and when it is easier for downstream firms.
|Date of creation:||Feb 2008|
|Date of revision:|
|Contact details of provider:|| Postal: CEDI, Brunel University,West London,UB8 3PH,United Kingdom|
Phone: +44 (0)1895 266649
Fax: +44 (0)1895 266649
Web page: http://www.cedi.org.uk
More information through EDIRC
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.:
- Cambini, Carlo & Valletti, Tommaso, 2003.
"Investments and Network Competition,"
CEPR Discussion Papers
3829, C.E.P.R. Discussion Papers.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Dimitrova, Magdalena & Schlee, Edward E., 2003. "Monopoly, competition and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1623-1642, December.
- Caillaud, Bernard & Tirole, Jean, 2001.
"Essential Facility Financing and Market Structure,"
CEPR Discussion Papers
2802, C.E.P.R. Discussion Papers.
- Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998.
"Contracts and Productive Information Gathering,"
Games and Economic Behavior,
Elsevier, vol. 25(2), pages 174-193, November.
- Cremer, J. & Khalil, F. & Rochet, J-C., 1997. "Contracts and productive information gathering," Discussion Paper Series In Economics And Econometrics 9707, Economics Division, School of Social Sciences, University of Southampton.
- Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Discussion Papers in Economics at the University of Washington 97-16, Department of Economics at the University of Washington.
- Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Working Papers 97-16, University of Washington, Department of Economics.
- Cremer, J. & Khalil, F. & Rochet, J-C., 1997. "Contracts and Productive Information Gathering," Papers 97.468, Toulouse - GREMAQ.
- Elisabetta Iossa & Patrick Legros, 2004.
"Auditing and property rights,"
ULB Institutional Repository
2013/7028, ULB -- Universite Libre de Bruxelles.
- Esther Hauk & Sjaak Hurkens, 1996.
"Secret information acquisition in Cournot markets,"
Economics Working Papers
233, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1997.
- Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
- Sjaak Hurkens & Nir Vulkan, 1996.
"Information acquisition and entry,"
Economics Working Papers
155, Department of Economics and Business, Universitat Pompeu Fabra.
- Ian M. Dobbs, 2004. "Intertemporal price cap regulation under uncertainty," Economic Journal, Royal Economic Society, vol. 114(495), pages 421-440, 04.
- Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
- Clark, Ephraim & Easaw, Joshy Z., 2007. "Optimal access pricing for natural monopoly networks when costs are sunk and revenues are uncertain," European Journal of Operational Research, Elsevier, vol. 178(2), pages 595-602, April.
- Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
- João Vareda, 2007.
"Access Regulation under Asymmetric Information about Demand,"
30, Portuguese Competition Authority.
- Vareda, João, 2007. "Access Regulation under Asymmetric Information about Demand," FEUNL Working Paper Series wp525, Universidade Nova de Lisboa, Faculdade de Economia.
- John Vickers, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 1-17.
- Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 653-671, May.
- Iossa, Elisabetta & Stroffolini, Francesca, 2002. "Price cap regulation and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 1013-1036, September.
- David M Newbery, 2002. "Regulating Unbundled Network Utilities," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 23-41.
- David Sappington, 2006. "Regulation in Vertically-Related Industries: Myths, Facts, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(1), pages 3-16, 02.
When requesting a correction, please mention this item's handle: RePEc:edb:cedidp:08-03. 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: (Sarmistha Pal)
If references are entirely missing, you can add them using this form.