The Promise and Pitfalls of Restructuring Network Industries

Stefan Buehler

German Economic Review, 2005, vol. 6, issue 2, 205-228

Abstract: 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.

Date: 2005
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https://doi.org/10.1111/j.1465-6485.2005.00127.x

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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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