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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
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    More about this item

    Keywords

    Bottleneck Input; Vertical Integration; Oligopoly; Entry;
    All these keywords.

    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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