Organisational Structures in Network Industries – An Application to the Railway Industry
This paper analyses the incentives to upgrade input quality in vertically related (network) industries. Upstream investments have a biased effect on the downstream companies and lead to vertical product differentiation. Different vertical structures such as vertical integration, ownership and legal unbundling lead to different investments. We find that, without regulation, vertical integration and legal unbundling regimes provide highest investment incentives and lead to highest welfare. However, we also find foreclosure in the downstream market if the potential degree of horizontal product differentiation of the entrant is low. Under ownership unbundling, investment incentives are lower but there is never foreclosure of the entrant since this would worsen double marginalisation. When the network operator is subject to a break-even regulation, the investment incentives are crowded out under legal and ownership unbundling whereas they remain nearly unchanged under vertical integration. Welfare and co umer surplus decrease under legal unbundling, but increase under the two other regimes.
|Date of creation:||2011|
|Publication status:||Forthcoming in|
|Contact details of provider:|| Postal: Universitätsstraße 25, 35037 Marburg|
Web page: http://www.uni-marburg.de/fb02/
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- Gabriel M. Ahlfeldt & Arne Feddersen, 2010.
"From periphery to core: economic adjustments to high speed rail,"
2010/38, Institut d'Economia de Barcelona (IEB).
- Arne Feddersen & Gabriel Ahlfeldt, 2011. "From Periphery to Core: Economic Adjustments to High Speed Rail," ERSA conference papers ersa11p545, European Regional Science Association.
- Ahlfeldt, Gabriel M. & Feddersen, Arne, 2010. "From Periphery to Core: Economic Adjustments to High Speed Rail," MPRA Paper 25106, University Library of Munich, Germany.
- Gabriel M. Ahlfeldt & Arne Feddersen, 2010. "From periphery to core: economic adjustments to high speed rail," LSE Research Online Documents on Economics 29430, London School of Economics and Political Science, LSE Library.
- João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
- Vareda, João, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," FEUNL Working Paper Series wp526, Universidade Nova de Lisboa, Faculdade de Economia.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Buehler, Stefan & Schmutzler, Armin & Benz, Men-Andri, 2004. "Infrastructure quality in deregulated industries: is there an underinvestment problem?," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 253-267, February.
- Stefan Buehler & Armin Schmutzler & Men-Andri Benz, 2002. "Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?," SOI - Working Papers 0209, Socioeconomic Institute - University of Zurich.
- Benz, Men-Andri & Bühler, Stefan & Schmutzler, Armin, 2003. "Infrastructure Quality in Deregulated Industries: Is there an Underinvestment Problem?," CEPR Discussion Papers 3836, C.E.P.R. Discussion Papers.
- Cremer, Helmuth & Crémer, Jacques & De Donder, Philippe, 2006. "Legal vs Ownership Unbundling in Network Industries," CEPR Discussion Papers 5767, C.E.P.R. Discussion Papers.
- Cremer, Helmuth & Crémer, Jacques & De Donder, Philippe, 2006. "Legal vs Ownership Unbundling in Network Industries," IDEI Working Papers 405, Institut d'Économie Industrielle (IDEI), Toulouse.
- Russell Pittman, 2007. "Make or buy on the Russian railway? Coase, Williamson, and Tsar Nicholas II," Economic Change and Restructuring, Springer, vol. 40(3), pages 207-221, September.
- Thomas Ehrmann & Karl-Hans Hartwig & Torsten Marner & Hendrik Schmale, 2009. "Specific Investments and Ownership Structures in Railways – An Experimental Analysis," Working Papers 12, Institute of Transport Economics, University of Muenster. Full references (including those not matched with items on IDEAS)
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