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Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?

Author

Listed:
  • Duarte Brito

    () (Universidade Nova de Lisboa)

  • Pedro Pereira

    () (Autoridade da Concorrência)

Abstract

In this article, we analyze the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream retail market. We develop a two-stage model, where in the first stage a downstream entrant negotiates an access price with three vertically integrated incumbents, and in stage 2 firms compete on Salop's circle. The incumbents may be asymmetrically located on the circle, to reflect differences in consumer shares. For some levels of asymmetry, the incumbents face a prisoners dilemma with respect to conceding access to their bottleneck inputs. Entry by a downstream firm may lead to lower retail prices. However, entry may also lead to higher retail prices for the access provider and for the entrant.

Suggested Citation

  • Duarte Brito & Pedro Pereira, 2006. "Access to Bottleneck Inputs under Oligopoly: a Prisoners Dilemma?," Working Papers 16, Portuguese Competition Authority.
  • Handle: RePEc:pca:wpaper:16
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    File URL: http://www.concorrencia.pt/download/WP16_Bottleneck_Feb_2008.pdf
    File Function: First version, 2006
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    Citations

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    Cited by:

    1. Matsushima, Noriaki & Mizuno, Keizo, 2014. "Competition for access provision: Infrastructure upgrades with spillovers," 25th European Regional ITS Conference, Brussels 2014 101419, International Telecommunications Society (ITS).
    2. Marc Bourreau & Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2010. "Upstream Competition between Vertically Integrated Firms," Working Papers hal-00440126, HAL.
    3. Bourreau, Marc & Cambini, Carlo & Hoernig, Steffen, 2015. "Geographic access markets and investments," Information Economics and Policy, Elsevier, vol. 31(C), pages 13-21.
    4. Marc Bourreau & Johan Hombert & Jerome Pouyet & Nicolas Schutz, 2011. "Upstream Competition between Vertically Integrated Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 677-713, December.
    5. Brito, Duarte & Pereira, Pedro & Vareda, João, 2012. "Incentives to invest and to give access to non-regulated new technologies," Information Economics and Policy, Elsevier, vol. 24(3), pages 197-211.
    6. Dominguez, Fernando, 2010. "Water scarcity: Can virtual water operators help?," Utilities Policy, Elsevier, vol. 18(3), pages 129-134, September.
    7. Dogan, Pinar & Bourreau, Marc & Manant, Matthieu, 2010. "A Critical Review of the “Ladder of Investment†Approach," Scholarly Articles 4777447, Harvard Kennedy School of Government.
    8. Steffen Hoernig, 2015. "Three Equivalent Salop Models and their Normative Representative Consumer," FEUNL Working Paper Series wp593, Universidade Nova de Lisboa, Faculdade de Economia.

    More about this item

    Keywords

    Bottleneck Input; Vertical Integration; Oligopoly; Entry;

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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