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Abstract
This paper examines the competitive effects of reorganizing a network industry’s vertical structure. In this industry, an upstream monopolist operates a network used as an input to produce horizontally differentiated final products that are imperfect substitutes. Three potential pitfalls of restructuring integrated network industries are analyzed: (i) double marginalization, (ii) underinvestment and (iii) vertical foreclosure. The paper studies the net effect of restructuring on retail prices and cost-reducing investment and discusses policy implications.
Keywords: Access pricing; investment; double marginalization; vertical foreclosure; product differentiation
Published Online: 2019-11-30
Published in Print: 2005-05-01
© 2019 by Walter de Gruyter Berlin/Boston