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Hoeffler, Felix and Kranz, Sebastian (2011). Legal unbundling can be a golden mean between vertical integration and ownership separation. Int. J. Ind. Organ., 29 (5). S. 576 - 589. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 0167-7187

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Abstract

We study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms. Legal unbundling means in our model 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 never yields lower quantities in the downstream market than ownership 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. (C) 2011 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Hoeffler, Felix UNSPECIFIED UNSPECIFIED UNSPECIFIED Kranz, Sebastian UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-489651
DOI:	10.1016/j.ijindorg.2011.01.001
Journal or Publication Title:	Int. J. Ind. Organ.
Volume:	29
Number:	5
Page Range:	S. 576 - 589
Date:	2011
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	0167-7187
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language SABOTAGE; COMPETITION; INDUSTRIES; ECONOMIES; COSTS Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/48965