Vertical relationships between health insurers and healthcare providers

The current institutional reforms in the Dutch healthcare sector may increase the extent of vertical relations (such as vertical contracts and vertical integration) between insurers and healthcare providers. Vertical relations may have both welfare increasing and welfare reducing effects. In this study, we focus on the latter, in particular on anticompetitive foreclosure. We distinguish three possible mechanisms that may lead to anticompetitive foreclosure, called respectively 'exclusivity', 'sabotage', and the 'waterbed effect'. We discuss under which conditions they come into play and which policy measures can prevent them.

Interpreting the Outsider Tradition in British European Policy Speeches from Thatcher to Cameron

The article investigates how British European policy thinking has been informed by what it identifies as an ‘outsider’ tradition of thinking about ‘Europe’ in British foreign policy dating from imperial times to the presen. The article begins by delineating five phases in the evolution of the outsider tradition through a survey of the relevant historiography back to 1815. The article then examines how prime ministers from Margaret Thatcher to David Cameron have looked to various inflections of the outsider tradition to inform their European discourses. The focus in the speech data sections is on British identity, history and the realist appreciation of international politics that informed the leaders’ suggestions for EEC/EU reform. The central argument is that historically informed narratives such as those making up the outsider tradition do not determine opinion-formers’ outlooks, but that they can be deeply impervious to rapid change

The Effects of Vertical Separation and Access Price Regulation on Investment Incentives

We study the impact of vertical separation between an upstream firm and its subsidiary, which competes in the retail market with an independent firm, with the incentive to invest in network upgrade. This question is discussed under two alternative regimes concerning the price of the vital input sold by the upstream firm: cost orientation regulation and absence of access price regulation. We show that the investment incentive decreases with vertical separation under both regimes. However, it is not always true that the investment incentive is higher without regulation.access price regulation, vertical integration, investment incentives

Incentives for Sabotage in Vertically Related Industries

We show that the incentives a vertically integrated supplier may have to disadvantage or "sabotage" the activities of downstream rivals vary with both the type of sabotage and the nature of downstream competition. Cost-increasing sabotage is typically profitable under both Cournot and Bertrand competition. In contrast, demand-reducing sabotage is often profitable under Cournot competition, but unprofitable under Bertrand competition. Incentives for sabotage can vary non-monotonically with the degree of product differentiation.Regulation, Vertical Integration, Access Pricing, Sabotage

Can Vertical Separation Reduce Non-Price Discrimination and Increase Welfare?

We investigate if vertical separation reduces non-price discrimination and increases welfare. Consider an industry consisting of a vertically integrated firm and an independent retailer, which requires access to the vertically integrated firm's wholesaler services. The wholesaler can degrade the quality of input it supplies to either of the retailers. Discrimination occurs if one of the retailers is supplied an input of lower quality than its rival. We show that separation of the vertically integrated firm reduces discrimination against the independent retailer, although it does not guarantee no-discrimination. Furthermore, with separation, the wholesaler may discriminate against the vertically integrated firm's retailer. Vertical separation impacts social welfare through two e¤ects. First, through the double-marginalization effect, which is negative. Second, through the quality degradation effect, which can be positive or negative. Hence, the net welfare impact of vertical separation is negative or potentially ambiguous.Vertigal integration; Vertical separation; Non-price discrimination.

Vertical foreclosure: a policy framework

Whenever you phone your mother, switch on the light, or buy health insurance you purchase a service or product from a chain of vertically related industries. Providers of these products or services need access to a telecommunications network, an electricity network or to health care services. In such industries, integration and exclusive contracts between vertically related firms may have important welfare enhancing effects, but can also deny or limit rivals' access to input or customers, leading to foreclosure. Foreclosure can harm welfare if it reduces competition. This document provides policymakers with a framework to assess the potential for welfare reducing foreclosure of vertical integration and vertical restraints and describes possible remedies. The framework consists of four steps. Each step requires its own detailed analysis. First, market power should exist either upstream or downstream. Second, a theory of foreclosure should be formulated that explains why foreclosure is a profitable equilibrium strategy. Third, the existence and magnitude of potential welfare enhancing effects of the vertical restrains or vertical integration should be assessed. Fourth, suitable policies to address foreclosure should be found.

Do we (still) need to regulate fixed network retail markets?

In the beginning of fixed network liberalisation in Europe in the late 1990s, the main concern of regulators was to lower calls prices. This was done by introducing wholesale regulation and promoting service based competition. Some years later, the concern of some regulators turned from too high calls prices to too low calls prices which might ‘squeeze’ entrants out of the market. We look at a simple model in which this development is explained by increasing competitive pressure from an ‘outside opportunity’, e.g. mobile telephony. We conclude that a margin squeeze is not necessarily used by the incumbent as a device to drive competitors out of the market and increase market power but can also result from increased inter-model competition. If this is the case, we argue that regulators should consider alternatives to cost oriented access prices such as retail minus or complete deregulation.access regulation, vertical integration, foreclosure, price squeeze, telecommunications, fixed networks

Globalisation and union opposition to technological change

We find that trade unions have a rational incentive to oppose the adaption of labour-saving technology when labour demand is inelastic and unions care much for employment relative to wages. Trade liberalisation typically increases trade union technology opposition. These conclusions are reached in a model of international duopoly with monopoly wage setting in one of the countries, and two-way trade. An important stepping stone for the result is to note that even though trade liberalisation means a tougher competitive environment for firms, labour demand tends to increase. We also find that the incentive for technology opposition is stronger in the more technologically advanced country and in the country with the larger home market, complementing earlier explanations for technological catch-up and leapfrogging. -- Es wird gezeigt, dass Gewerkschaften einen rationalen Anreiz haben, sich gegen die Einführung von arbeitssparendem technologischen Fortschritt zu wehren, wenn die Arbeitsnachfrage unelastisch ist und den Gewerkschaften das Beschäftigungsniveau im Vergleich zur Lohnhöhe relativ wichtig ist. Handelsliberalisierung verschärft typischerweise diesen Widerstand gegen neue Technologien. Diese Schlussfolgerungen werden abgeleitet in einem internationalen Duopolmodell. Dabei werden in einem Land die Löhne kollektiv festgelegt und es findet internationaler Handel statt. Zentral für die Einsicht des Modells ist die Tatsache, dass der internationale Handel zwar den Wettbewerb zwischen den Unternehmen verstärkt, sich aber positiv auf die Arbeitsnachfrage auswirkt. Auch zeigt sich, dass der Widerstand gegen neue Technologien im technologisch fortgeschritteneren Land stärker ist, sowie in dem Land mit größerem Heimatmarkt. Dies liefert eine zusätzliche Erklärung für technologische Aufholprozesse und wechselnde Technologieführerschaft.Trade liberalisation,technology adaption,international unionised oligopoly

Globalisation and union opposition to technological change

We find that trade unions have a rational incentive to oppose the adoption of labour-saving technology when labour demand is inelastic and unions care much for employment relative to wages. Trade liberalisation typically increases trade union technology opposition. These conclusions are reached in a model of international duopoly with monopoly wage setting in one of the countries, and two-way trade. An important stepping stone for the result is to note that even though trade liberalisation means a tougher competitive environment for firms, labour demand tends to increase. We also find that the incentive for technology opposition is stronger in the more technologically advanced country and in the country with the larger home market, complementing earlier explanations for technological catch-up and leapfrogging.Trade liberalisation; technology adoption; international unionised oligopoly.