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Synergies and non-discriminatory access pricing

  • Hagen, Kåre P.

    ()

    (NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION)

  • Hansen, Bjørn

    (Telenor)

  • Vagstad, Steinar

    ()

    (University of Bergen, Department of Economics)

According to the new European telecom regulation, incumbent operators are required to provide access to such bottlenecks on fair, reasonable and non-discriminatory terms. We explore different interpretations of this general rule in a model in which the bottleneck can be used by external (to the bottleneck firm) as well as internal service providers, and also derive some properties of the solution to the bottleneck owner’s maximization problem as well as that of a welfare-maximizing regulator. In particular, we derive an ECPR rule that also corrects for synergies. Next, by imposing certain symmetry requirements we establish a benchmark in which the external service provider is a competitive fringe and internal and external end-users face identical prices and buy identical quantities of the two services. This, we argue, can be dubbed a non-discrimination benchmark. We then show that introducing certain synergies makes the bottleneck want to favour external supply, while making the fringe less competitive has the opposite implication.

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File URL: http://www.uib.no/filearchive/14-04.pdf
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Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 13/04.

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Length: 20 pages
Date of creation: 06 Nov 2004
Date of revision:
Handle: RePEc:hhs:bergec:2004_013
Contact details of provider: Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
Web page: http://www.uib.no/econ/en
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  1. Severin Borenstein & James Bushnell, 1998. "An Empirical Analysis of the Potential for Market Power in California's Electricity Industry," NBER Working Papers 6463, National Bureau of Economic Research, Inc.
  2. Jensen, S. G. & Skytte, K., 2002. "Interactions between the power and green certificate markets," Energy Policy, Elsevier, vol. 30(5), pages 425-435, April.
  3. Borenstein, Severin & Bushnell, James & Knittel, Chris, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," Staff General Research Papers 31548, Iowa State University, Department of Economics.
  4. Amundsen, Eirik S. & Mortensen, Jorgen Birk, 2001. "The Danish Green Certificate System: some simple analytical results," Energy Economics, Elsevier, vol. 23(5), pages 489-509, September.
  5. Torstein Bye, 2003. "On the Price and Volume Effects from Green Certificates in the Energy Market," Discussion Papers 351, Statistics Norway, Research Department.
  6. Amundsen, Eirik S. & Mortensen, Jorgen Birk, 2002. "Erratum to "The Danish Green Certificate System: some simple analytical results": [Energy Economics 23 (2001) 489-509]," Energy Economics, Elsevier, vol. 24(5), pages 523-524, September.
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