Jump to ContentJump to Main Navigation
Show Summary Details

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

4 Issues per year


IMPACT FACTOR 2015: 0.250
5-year IMPACT FACTOR: 0.825

SCImago Journal Rank (SJR) 2015: 0.501
Source Normalized Impact per Paper (SNIP) 2015: 0.418
Impact per Publication (IPP) 2015: 0.455

Online
ISSN
1935-1682
See all formats and pricing

 


Select Volume and Issue

30,00 € / $42.00 / £23.00

Get Access to Full Text

Vertical Mergers and Competition with a Regulated Bottleneck Monopoly

Alexander Galetovic
  • 1Universidad de los Andes,
/ Ricardo Sanhueza
  • 2Universidad de los Andes,
Published Online: 2009-10-28 | DOI: https://doi.org/10.2202/1935-1682.2105

Abstract

Consider a bottleneck monopoly whose access charge is regulated above marginal cost and produces an essential input used by an oligopoly of downstream firms. Should the monopolist be allowed to vertically integrate into the downstream market? Policy makers often argue that the vertically integrated subsidiary enjoys an undue advantage, because it receives access at marginal cost. We show that there is no undue advantage.With perfect competition downstream vertical integration is irrelevant because the subsidiary substitutes downstream output one-to-one and faces a per-unit opportunity cost equal to the access charge.With an oligopoly consumers and the bottleneck monopoly gain with vertical integration. By contrast, competitors lose oligopolistic rents. Social welfare increases, unless output is redistributed towards a very inefficient vertically integrated firm.

Keywords: access charge; network industries; oligopoly; stability


Published Online: 2009-10-28


Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 9, Issue 1, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2105, October 2009

Comments (0)

Please log in or register to comment.