We study how vertical integration affects the acquisition and transmission of demand information in regulated network industries. Demand information helps to set the access price, incentivize infrastructure investment, and foster competition in the unregulated downstream market. We show that when demand information is costly and private, the optimal access prices are independent of demand levels. Vertical integration then secures greater welfare in new markets where little demand information is available or where infrastructure cost is low, or when investing is highly risky. In the remaining cases, vertical separation is preferable. © 2012 Springer Science+Business Media, LLC.
Vertical Integration and Costly Demand Information in Regulated Network Industries / E., Iossa; Stroffolini, Francesca. - In: REVIEW OF INDUSTRIAL ORGANIZATION. - ISSN 0889-938X. - STAMPA. - 40:4(2012), pp. 249-271. [10.1007/s11151-012-9340-1]
Vertical Integration and Costly Demand Information in Regulated Network Industries
STROFFOLINI, FRANCESCA
2012
Abstract
We study how vertical integration affects the acquisition and transmission of demand information in regulated network industries. Demand information helps to set the access price, incentivize infrastructure investment, and foster competition in the unregulated downstream market. We show that when demand information is costly and private, the optimal access prices are independent of demand levels. Vertical integration then secures greater welfare in new markets where little demand information is available or where infrastructure cost is low, or when investing is highly risky. In the remaining cases, vertical separation is preferable. © 2012 Springer Science+Business Media, LLC.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
