Access Price Cap Mechanisms and Industry Structure with Information Acquisition

Francesca Stroffolini ()
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Francesca Stroffolini: Università di Napoli "Federico II"

Rivista di Politica Economica, 2009, issue 1, 209-247

Abstract: This paper tackles the issue of the welfare desirability of downstream integration versus separation when facing the problem of socially valuable information acquisition on the upstream cost in regulated network industries. I consider an upstream natural monopoly with cost uncertainty, regulated through an access price cap mechanism, and a downstream unregulated Cournot competition. Cost information improves the performance of the regulatory mechanism but it can only be acquired by the monopolist; the information acquisition is unobservable. I show that the access price cap mechanism provides a vertically integrated firm with greater incentives to acquire information and this favours integration.

Keywords: access price cap mechanisms; integration; separation; information acquisition (search for similar items in EconPapers)
JEL-codes: D82 D83 L5 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:y:2009:i:1:p:209-247

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