Regulation of an Open Access Essential Facility

21 Pages Posted: 8 Oct 2008

See all articles by Axel Gautier

Axel Gautier

University of Liège - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Manipushpak Mitra

University of Bonn - Institute of Economic Theory I

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Abstract

A vertically integrated firm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both firms use the same essential input. The regulator's objectives are (i) to ensure financing of the essential input; and (ii) to generate competition in the downstream market. The regulatory mechanism grants non-discriminatory access of the essential facility to the entrant provided it pays a two-part tariff to the incumbent. The optimal mechanism generates inefficient entry. The inefficient entry captures the trade-off between market efficiency and infrastructure financing resulting from incomplete information and non-discriminatory access.

Suggested Citation

Gautier, Axel and Mitra, Manipushpak, Regulation of an Open Access Essential Facility. Economica, Vol. 75, Issue 300, pp. 662-682, November 2008, Available at SSRN: https://ssrn.com/abstract=1280399 or http://dx.doi.org/10.1111/j.1468-0335.2007.00638.x

Axel Gautier (Contact Author)

University of Liège - Research Center on Public and Population Economics ( email )

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Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

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Manipushpak Mitra

University of Bonn - Institute of Economic Theory I ( email )

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D-53113 Bonn
Germany

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