Vertical Integration and Costly Demand Information in Regulated Network Industries

Elisabetta Iossa and Francesca Stroffolini ()

CEDI Discussion Paper Series from Centre for Economic Development and Institutions(CEDI), Brunel University

Abstract: We study how vertical integration in regulated network industries affects the acquisition and transmission of socially valuable information on demand. We consider a regulated upstream monopoly with downstream unregulated Cournot competition and demand uncertainty. Demand information serves to set the access price and to foster competition in the unregulated segment but demand realizations can be observed at some cost only by the upstream monopolist; information acquisition is also unobservable. We show that vertical integration favours acquisition of demand information because of the transmission of information generated by the public nature of the regulatory mechanism. This holds both when access to information is easier for the upstream firm and when it is easier for downstream firms.

Pages: 32 pages
Date: 2008-02
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-net
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Vertical Integration and Costly Demand Information in Regulated Network Industries (2012)
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