Pricing to preclude sabotage in regulated industries

Arup Bose, Debashis Pal and David Sappington

International Journal of Industrial Organization, 2017, vol. 51, issue C, 162-184

Abstract: We characterize the optimal access price and retail price for a vertically-integrated incumbent supplier (V) that faces limited competition from a new entrant in the retail sector. The optimal prices provide V with a relatively high wholesale profit margin and a relatively low retail profit margin. Consequently, V has no incentive to raise the costs of its retail rival.

Keywords: Sabotage; Raising rivals’ costs; Wholesale and retail price regulation (search for similar items in EconPapers)
JEL-codes: L51 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:51:y:2017:i:c:p:162-184

DOI: 10.1016/j.ijindorg.2017.01.004

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