Integration and Separation with Costly Demand Information

Elisabetta Iossa and Francesca Stroffolini ()

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: We consider an industry characterized by a regulated natural monopoly in the upstream market and Cournot competition with demand uncertainty in the unregulated downstream market. The realization of demand cannot be observed by the regulator, whilst it can be privately observed at some cost by the upstream monopolist. Information acquisition is also unobservable. We study whether it is better to allow the monopolist to operate in the downstream market (integration) or instead to exclude it (separation). We show that asymmetric information on demand favours separation but unobservability of information acquisition favours integration.

Keywords: Information acquisition; liberalization and separation (search for similar items in EconPapers)
JEL-codes: D82 D83 L5 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-01
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Integration and Separation with Costly Demand Information (2007)
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