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Regulation and third-party discrimination in vertically related markets: The case of German electricity

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  • Brunekreeft, Gert

Abstract

This paper explores the relation between the regulation of monopolistic upstream prices and the incentives of a vertically integrated input monopolist to discriminate third parties on the downstream market. Currently, this is an issue in network industries like telecommunications, electricity and railways and has sparked off a controversy in the literature. The paper examines how the incentives to discriminate depend on the level of the upstream prices, the potential competitiveness of the downstream market and the efficiency of the competitors as compared to the integrated firm's downstream subsidiary. The insights are applied to the electricity supply industry in Germany.

Suggested Citation

  • Brunekreeft, Gert, 2001. "Regulation and third-party discrimination in vertically related markets: The case of German electricity," Discussion Papers 74 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
  • Handle: RePEc:zbw:aluivr:74r
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    File URL: https://www.econstor.eu/bitstream/10419/47614/1/329081047.pdf
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    References listed on IDEAS

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    1. Baumol, W, & Ordover, J. & Willig, R., 1996. "Parity Pricing and Its Critics: Necessary Condition for Efficiency in Provision of Bottleneck Services to Competitors," Working Papers 96-33, C.V. Starr Center for Applied Economics, New York University.
    2. John Vickers, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 1-17.
    3. Economides, Nicholas, 2000. "Comment on "A note on N. Economides: The Incentive for Non-Price Discrimination by an Input Monopolist," by Mats Bergman," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 989-991, August.
    4. Mandy, David M, 2000. "Killing the Goose That May Have Laid the Golden Egg: Only the Data Know Whether Sabotage Pays," Journal of Regulatory Economics, Springer, vol. 17(2), pages 157-172, March.
    5. Sibley, David S. & Weisman, Dennis L., 1998. "Raising rivals' costs: The entry of an upstream monopolist into downstream markets," Information Economics and Policy, Elsevier, vol. 10(4), pages 451-470, December.
    6. Allen, Bruce T, 1971. "Vertical Integration and Market Foreclosure: The Case of Cement and Concrete," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 251-274, April.
    7. 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.
    8. Reiffen, David & Schumann, Laurence & Ward, Michael R, 2000. "Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 253-286, September.
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    Citations

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    Cited by:

    1. Gabelmann, Anne, 2001. "Regulating European telecommunications markets: Unbundled access to the local loop outside urban areas," Discussion Papers 81, University of Freiburg, Institute for Transport Economics and Regional Policy.
    2. Gert Brunekreeft, 2002. "Regulation and Third-Party Discrimination in the German Electricity Supply Industry," European Journal of Law and Economics, Springer, vol. 13(3), pages 203-220, May.
    3. Knieps, Günter, 2006. "The different role of mandatory access in German regulation of railroads and telecommunications," Discussion Papers 104 [rev.], University of Freiburg, Institute for Transport Economics and Regional Policy.
    4. Knieps, Günter, 2004. "Privatisation of Network Industries in Germany : A Disaggregated Approach," Discussion Papers 100, University of Freiburg, Institute for Transport Economics and Regional Policy.
    5. Knieps, Günter, 2002. "Does the system of letter conveyance constitute a bottleneck resource?," Discussion Papers 88, University of Freiburg, Institute for Transport Economics and Regional Policy.
    6. Knieps, Günter, 2002. "Wholesale, retail pricing in telecom markets," Discussion Papers 84, University of Freiburg, Institute for Transport Economics and Regional Policy.
    7. Knieps, Günter, 2008. "The net neutrality debate and the German communications and competition law," Discussion Papers 120, University of Freiburg, Institute for Transport Economics and Regional Policy.

    More about this item

    Keywords

    regulation; discrimination; vertical integration; electricity;

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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