The Promise and Pitfalls of Restructuring Network Industries

The Promise and Pitfalls of Restructuring Network Industries AbstractThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png German Economic Review de Gruyter

The Promise and Pitfalls of Restructuring Network Industries

German Economic Review, Volume 6 (2): 24 – May 1, 2005

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Publisher
de Gruyter
Copyright
© 2019 by Walter de Gruyter Berlin/Boston
ISSN
1465-6485
eISSN
1468-0475
DOI
10.1111/j.1465-6485.2005.00127.x
Publisher site
See Article on Publisher Site

Abstract

AbstractThis 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.

Journal

German Economic Reviewde Gruyter

Published: May 1, 2005

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