The Promise and Pitfalls of Restructuring Network Industries

Posted: 11 Dec 2004 Last revised: 26 Mar 2020

See all articles by Stefan Buehler

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Date Written: 2005

Abstract

This paper examines the competitive effects of reorganizing a network industry's vertical structure. In this industry, an upstream monopolist operates a network used as an input to produce horizontally differentiated final products that are imperfect substitutes. Three potential pitfalls of restructuring integrated network industries are analyzed: (i) double marginalization, (ii) underinvestment, and (iii) vertical foreclosure. The paper studies the net effect of restructuring on retail prices and cost-reducing investment and discusses policy implications.

Keywords: Access pricing, investment, double marginalization, vertical foreclosure, product differentiation

JEL Classification: D43, L43

Suggested Citation

Buehler, Stefan, The Promise and Pitfalls of Restructuring Network Industries (2005). German Economic Review, Vol. 6, No. 2, pp. 205-228, 2005, Available at SSRN: https://ssrn.com/abstract=630403

Stefan Buehler (Contact Author)

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

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