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|
|Date of revision:|
|Publication status:||Forthcoming in|
|Contact details of provider:|| Postal: Universitätsstraße 25, 35037 Marburg|
Web page: http://www.uni-marburg.de/fb02/
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.:
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- 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.
- 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.
- 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.
- Ahlfeldt, Gabriel M. & Feddersen, Arne, 2010. "From Periphery to Core: Economic Adjustments to High Speed Rail," MPRA Paper 25106, University Library of Munich, Germany.
- 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.
- 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.
- 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.
- João Vareda, 2007.
"Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction,"
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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:mar:magkse:201109. 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: (Bernd Hayo)
If references are entirely missing, you can add them using this form.