Access Price Cap Mechanisms and Industry Structure with Information Acquisition
This paper considers a network industry characterized by an upstream natural monopoly with cost uncertainty, regulated through an access price mechanism, and an unregulated downstream market with Cournot competition. The upstream monopolist can acquire information on the upstream cost while the information acquisition is prohibitively costly for the regulator and downstream firms. The information acquisition is also unobservable. I investigate how the presence of costly and socially valuable information on the upstream cost affects the desirability of allowing the upstream monopolist to produce in the downstream market (integration) rather than excluding it (separation). I show that when the upstream monopolist is regulated only through an access price cap, the information acquisition problem provides an argument in favour of vertical integration. However, when the regulator also obliges the upstream monopolist to share her access profits with consumers, a bias emerges in favour of separation via the impact of the access-profit sharing plan on the upstream monopolist's incentives to transmit information to her rival in the downstream market.
|Date of creation:||01 Jan 2008|
|Publication status:||Published in Rivista di Politica Economica, 2009, issue 1, pp. 209-247|
|Contact details of provider:|| Postal: I-80126 Napoli|
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Web page: http://www.csef.it/
More information through EDIRC
References listed on IDEAS
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.:
- Elisabetta Iossa & Francesca Stroffolini, 2007.
"Integration and Separation with Costly Demand Information,"
The Centre for Market and Public Organisation
07/167, Department of Economics, University of Bristol, UK.
- Elisabetta Iossa & Francesca Stroffolini, 2007. "Integration and Separation with Costly Demand Information," CSEF Working Papers 170, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Cremer, Jacques & Khalil, Fahad & Rochet, Jean-Charles, 1998. "Contracts and Productive Information Gathering," Games and Economic Behavior, Elsevier, vol. 25(2), pages 174-193, November.
- Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Discussion Papers in Economics at the University of Washington 97-16, Department of Economics at the University of Washington.
- Cremer, J. & Khalil, F. & Rochet, J-C., 1997. "Contracts and productive information gathering," Discussion Paper Series In Economics And Econometrics 9707, Economics Division, School of Social Sciences, University of Southampton.
- Khalil, F & Rochet, J-C, 1997. "Contracts and Productive Information Gathering," Working Papers 97-16, University of Washington, Department of Economics.
- Cremer, J. & Khalil, F. & Rochet, J-C., 1997. "Contracts and Productive Information Gathering," Papers 97.468, Toulouse - GREMAQ.
- Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
- Laffont, Jean-Jacques & Tirole, Jean, 1996. "Creating Competition through Interconnection: Theory and Practice," Journal of Regulatory Economics, Springer, vol. 10(3), pages 227-256, November.
- Dov Fried, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 367-381.
- Iossa, Elisabetta & Stroffolini, Francesca, 2002. "Price cap regulation and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 1013-1036, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:193. 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: (Lia Ambrosio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.