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Jürges, Hendrik

The B.E. Journal of Economic Analysis & Policy

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

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias


IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

Online
ISSN
1935-1682
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Volume 9, Issue 1

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Vertical Mergers and Competition with a Regulated Bottleneck Monopoly

Alexander Galetovic / Ricardo Sanhueza
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

About the article

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.

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Alexander Galetovic and Cristián M. Muñoz
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