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Bottleneck Access with Structural Regulation and Endogenous Competition

Author

Listed:
  • Luciano Greco

    () (University of Padova)

  • Fabio Manenti

    () (University of Padova)

Abstract

In a simple model of network industry, where an upstream monopolist provides an essential input for downstream service supply, we analyze the competitive settings arising in the downstream market under alternative regulatory frameworks; we combine structural (i.e. vertical integration, functional/ownership separation) and conduct (discriminatory and nondiscriminatory access) regulatory remedies. Downstream firms are characterized by different levels of cost efficiency in the provision of the service. We show that the degree of heterogeneity in firmsÕ cost efficiency is critical to the determination of the amount of competition that emerges in the downstream market, and of the efficiency of the industry. We show that i) when downstream firms are significantly heterogenous, discriminatory access fees may be socially desirable and ii) vertical integration is always socially preferable.

Suggested Citation

  • Luciano Greco & Fabio Manenti, 2013. "Bottleneck Access with Structural Regulation and Endogenous Competition," "Marco Fanno" Working Papers 0162, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0162
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    Keywords

    Vertical Integration; Functional Separation; Ownership Separation; Regulation; Discriminatory Access Fees.;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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