Access Pricing: A Comparison Between Full Deregulation and Two Alternative Instruments of Access Price Regulation, Cost-Based and Retail-Minus

Paula Sarmento and Antonio Brandao

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In this paper we compare two instruments of access price regulation, cost-based and retail-minus, with the full deregulation hypothesis. We consider an upstream monopolist firm that sells a vital input to an independent firm and to a subsidiary firm in the downstream market. We conclude that the retail-minus regulation avoids foreclosure and leads to better results than cost-based regulation in terms of investment level and consumer surplus. Moreover, retail-minus regulation allows a higher consumer surplus than deregulation of access price as long as the regulator carefully defines the retail-minus instrument. We also compare retail-minus regulation with the Efficient Component Pricing Rule and we conclude that the two mechanisms can lead to different results.

Keywords: access regulation; vertical integration; retail-minus; Efficient Component Pricing Rule (search for similar items in EconPapers)
JEL-codes: L12 L51 L96 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-03
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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Citations: View citations in EconPapers (6)

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Journal Article: Access pricing: A comparison between full deregulation and two alternative instruments of access price regulation, cost-based and retail-minus (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:por:cetedp:0603

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