Excess entry in vertically related markets

This paper considers the problem of excess entry in vertically related markets when the regulator can regulate market structure and access charges. The endogenous access charge introduces an asymmetry between firms which affects the degree of excess entry. I find that the excess entry result of Mankiw and Whinston (1986) does not generally carry over to vertically related markets. It is shown that regulating access charges combined with no structure regulation is always the best option. For an interval of the downstream fixed cost, no regulation of the access charge yields the same level of welfare as the regulated case

Regulation and foreclosure

The paper considers the optimal regulation of access charges, and the effect such regulation has on incentives to foreclose downstream rival firms. I show that when a vertically integrated firm is able to discriminate against rivals by means of non-price measures, optimal access charges must be set higher than in the case when no discrimination is possible and will always provide a positive access margin. The reason is that the level of the access charge affects incentives to practice foreclosure. The optimal access charge may, when non-price measures are not possible, be lower than marginal cost of providing access

Foreclosure in contests

We consider a contest in which one firm is a favourite as it initially has a cost advantage over rivals. Instead of taking the set of rivals as given, we consider the possibility that the favourite transfers the source of its advantage wholly or partially to a subset of rival firms. The result of this may be foreclosure of those firms that do not receive the cost reduction. We present conditions under which this transfer will be expected to occur, and show that the dominant firm will prefer to grant some rivals the maximum cost reduction even if a partial transfer can be made. Furthermore we consider the welfare properties of excluding some rivals. Applications include lobbying, patent races and access to essential infrastructure.Foreclosure; contest

Management, markets and politics: statistical screening for historical footprints in Arctic coal mining

This is a published version of the paper, available at LLC "CPC "Business Perspectives" at https://www.businessperspectives.org/.The paper looks at the economic performance of the main (coal mining) company operating in Svalbard based on time series data from 1922 to 2006 and uses statistical techniques to detect structural breaks in economic indicators decomposed into components that the company control or influence and components that are exogenous. The analysis suggests distinctive historical periods and illustrates that statistical time series analysis may be used as a screening device to discriminate between noise and real change

Input price discrimination with heterogenous sub-markets

The objective of the paper is to analyse optimal prices for an input monopolist in the presence of asymmetric information about the size of the sub-markets, and when the sub-markets may provide either substitute or complementary products to the input provider’s own downstream subsidiary. The downstream firms produce products that may be vertically differentiated, but the degree of vertical differentiation is assumed to be private knowledge to the downstream firms

Excess entry in vertically related markets

This paper considers the problem of excess entry in vertically related markets when the regulator can regulate market structure and access charges. The endogenous access charge introduces an asymmetry between firms which affects the degree of excess entry. I find that the excess entry result of Mankiw and Whinston (1986) does not generally carry over to vertically related markets. It is shown that regulating access charges combined with no structure regulation is always the best option. For an interval of the downstream fixed cost, no regulation of the access charge yields the same level of welfare as the regulated case

Regulation of a vertically differentiated duopoly

This paper focuses on the optimal quality regulation of vertically differentiated duopolies in the presence of asymmetric information. In the model presented there are cross-effects on the information rent. Contrary to standard single-agent models, the production levels are distorted in favour of the most efficient firm, whose production level is increased under asymmetric information relative to full information. The first-best outcomes can only be achieved if both firms are of the most efficient types. The optimal degree of vertical differentiation is also discussed. Furthermore, some extensions to the model are examined (the presence of cost complementarity, quality as complements etc.)

Efficiency in complementary partnerships with competition

This paper investigates a market with strictly complementary inputs, with a particular emphasis on how efficiency can be implemented when the productive firms undertake unobservable effort. It is shown that simple linear sharing rules cannot implement socially optimal effort, but a modified linear sharing rule can implement the first-best outcome and a restricted linear sharing rule can be used to implement the second-best outcome. In addition, problems associated with commitment to the sharing rule is discussed

Regulation and foreclosure

The paper considers the optimal regulation of access charges, and the effect such regulation has on incentives to foreclose downstream rival firms. I show that when a vertically integrated firm is able to discriminate against rivals by means of non-price measures, optimal access charges must be set higher than in the case when no discrimination is possible and will always provide a positive access margin. The reason is that the level of the access charge affects incentives to practice foreclosure. The optimal access charge may, when non-price measures are not possible, be lower than marginal cost of providing access