Pricing Third-Party Access to Essential Facilities under Asymmetric Information

Seok Yang and Myeonghwan Cho
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Seok Yang: University of Seoul
Myeonghwan Cho: University of Seoul

Korean Economic Review, 2024, vol. 40, 315-348

Abstract: We investigate a market wherein a dominant firm owns an essential facility and other firms use this facility by paying an access fee. Loss in social welfare occurs regardless of whether the cost of operating the essential facility is public or private information to the dominant firm. The government can improve social welfare by regulating the access fee, but it has limitations in improving social welfare when the cost of operating the essential facility is private information to the dominant firm. An appropriate tax-subsidy scheme can resolve the limitations by inducing the dominant firm to disclose its private information completely.

Keywords: Third-party access; Essential facility; Asymmetric information (search for similar items in EconPapers)
JEL-codes: C70 D43 L13 (search for similar items in EconPapers)
Date: 2024
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