Two-Part Access Pricing and Imperfect Competition

Abstract:     
This paper considers a vertically separated industry with an upstream monopolist who supplies an essential input to two downstream Cournot firms. This situation is relevant to a number of sectors, including the telecommunications industry where trunk operators must have access to the local network of an incumbent firm to provide their long-distance service. The paper analyzes two-part access pricing and input price discrimination under different regulatory settings, and it finds that discrimination may produce adverse welfare effects when it is practiced by the unregulated upstream firm.

JEL Classifications: D43, L51, L96

Working Paper Series