Legal Unbundling can be a Golden Mean between Vertical Integration and Separation

Arbeitspapier

We study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms. Legal unbundling means that a downstream firm owns the upstream firm but this upstream firm is legally independent and maximizes its own upstream profits. We allow for non-tariff discrimination by the upstream firm and show that under quite general conditions legal unbundling yields (weakly) higher quantities in the downstream market than vertical separation and integration. Therefore, typically consumer surplus will be largest under legal unbundling. Outcomes under legal unbundling are still advantageous when we allow for discriminatory capacity investments, investments into marginal cost reduction and investments into network reliability. If access prices are unregulated, however, legal unbundling may be quite undesirable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 15/2007

Classification and Topics

• Classification: Wirtschaft ; Vertical Restraints; Resale Price Maintenance; Quantity Discounts ; Legal Monopolies and Regulation or Deregulation ; Economics of Regulation
• Subject: Network industries ; regulation ; vertical relations ; investments ; ownership ; sabotage ; Vertikale Konzentration ; Lieferanten-Kunden-Beziehung ; Netzzugang ; Unternehmensentflechtung ; Monopol ; Investition ; Eigentum ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Höffler, Felix ; Kranz, Sebastian
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/27156
• Last update: 10.03.2025, 11:43 AM CET