The optimal industry structure in a vertically related market
We consider a vertically related market characterized by down- stream imperfect competition and by the monopolistic provision of an essential facility-based input, whose price is set by a social-welfare maximizing regulator. Our model shows that the regulatory knowl- edge about the cost for providing the monopolistic input crucially af- fects the design of the optimal industry structure. In particular, we compare ownership separation, which prevents a single company from having the control of both upstream and downstream operations, and legal separation, under which these activities are legally unbundled but common ownership is allowed. As long as the regulator has full infor- mation, the two industry patterns yield the same social welfare level. However, under asymmetric information about the input costs legal separation can make the whole society better off.
|Date of creation:||Apr 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://sfb649.wiwi.hu-berlin.de
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hum:wpaper:sfb649dp2010-024. 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: (RDC-Team)
If references are entirely missing, you can add them using this form.