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Regulation of an Open Access Essential Facility

CORE Discussion Paper No. 2003/84

24 Pages Posted: 23 Apr 2007  

Axel Gautier

University of Liege - 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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003

Abstract

In this paper we consider the problem of regulating an open access essential facility. A vertically integrated firm owns an essential input and operates on the downstream market under the roof of a regulatory mechanism. There is a potential entrant in the downstream market. Both competitors use the same essential input to provide the final services to the consumers. The regulator designs a mechanism that guarantees financing of the essential input and adequate competition in the downstream market. We consider a regulatory mechanism that grants non-discriminatory access of the essential facility to a competitor. We show that this mechanism is welfare improving but it generates inefficient entry. That is a more efficient competitor may stay out of the market or a less efficient competitor may enter the market.

Keywords: regulation, railways, network, entry, competition, access charge, asymmetric information

JEL Classification: D82, H54, L11, L51

Suggested Citation

Gautier, Axel and Mitra, Manipushpak, Regulation of an Open Access Essential Facility (November 2003). Available at SSRN: https://ssrn.com/abstract=981422 or http://dx.doi.org/10.2139/ssrn.981422

Axel Gautier (Contact Author)

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

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

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

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

Manipushpak Mitra

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

Adenauerallee 24-26
D-53113 Bonn
Germany

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