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The Effects of Vertical Separation and Access Price Regulation on Investment Incentives


  • Paula Sarmento

    () (CEF.UP and Faculty of Economics of University of Porto)


We study the impact of vertical separation between an upstream firm and its subsidiary, which competes in the retail market with an independent firm, with the incentive to invest in network upgrade. This question is discussed under two alternative regimes concerning the price of the vital input sold by the upstream firm: cost orientation regulation and absence of access price regulation. We show that the investment incentive decreases with vertical separation under both regimes. However, it is not always true that the investment incentive is higher without regulation.

Suggested Citation

  • Paula Sarmento, 2011. "The Effects of Vertical Separation and Access Price Regulation on Investment Incentives," FEP Working Papers 410, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:410

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    References listed on IDEAS

    1. Øystein Foros & Hans Kind & Lars Sørgard, 2007. "Managerial incentives and access price regulation," European Journal of Law and Economics, Springer, vol. 23(2), pages 117-133, April.
    2. Beard, T Randolph & Kaserman, David L & Mayo, John W, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-333, September.
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    Cited by:

    1. Ben Dkhil, Inès, 2014. "Regulation and Investment in Telecom Network Infrastructure Facilities: The Recent Developments and Debates," MPRA Paper 72910, University Library of Munich, Germany, revised 02 Feb 2015.
    2. Ben Dkhil, Inès, 2014. "Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing countries: Panel Data Applications," MPRA Paper 59337, University Library of Munich, Germany.

    More about this item


    access price regulation; vertical integration; investment incentives;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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