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http://ssrn.com/abstract=2129584
 
 

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Regulated Input Price, Vertical Separation, and Leadership in Free Entrymarkets


Toshihiro Matsumura


University of Tokyo - Institute of Social Science

Noriaki Matsushima


Osaka University - Institute of Social and Economic Research

August 15, 2012

ISER Discussion Paper No. 853

Abstract:     
We examine incentives of bottleneck facility holders to manipulate access charge accounting in free entry downstream markets. We consider the situation wherein one firm holds an upstream bottleneck facility and new entrants use it at the regulated price (access fee) to provide final products. The bottleneck facility holder affects the regulated input price. We investigate how vertical separation affects the incentive for manipulation and the resulting input price. We find that the results depend on whether the incumbent is the Stackelberg leader in the product market. If the incumbent cannot take leadership in the product market and faces Cournot competition, vertical separation reduces the incentive for manipulation and the resulting input price. The opposite result is derived when the incumbent can take leadership in the product market.

Number of Pages in PDF File: 22

Keywords: network industry, access charge, manipulation of accounting, regulation

JEL Classification: L51, L13

working papers series


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Date posted: August 15, 2012  

Suggested Citation

Matsumura, Toshihiro and Matsushima, Noriaki, Regulated Input Price, Vertical Separation, and Leadership in Free Entrymarkets (August 15, 2012). ISER Discussion Paper No. 853. Available at SSRN: http://ssrn.com/abstract=2129584 or http://dx.doi.org/10.2139/ssrn.2129584

Contact Information

Toshihiro Matsumura
University of Tokyo - Institute of Social Science ( email )
Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan
Noriaki Matsushima (Contact Author)
Osaka University - Institute of Social and Economic Research ( email )
6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan
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