Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/23824 
Year of Publication: 
2006
Series/Report no.: 
Discussion Paper No. 255
Publisher: 
European University Viadrina, Department of Business Administration and Economics, Frankfurt (Oder)
Abstract: 
We analyze vertical structures where a regulated network operator serves n network users, and the network users compete in quantities for customers. We distinguish two cases: (i) none of the network users are related to the network operator (ownership unbundling), (ii) one of the network users is partially integrated with the operator and the others are disintegrated (legal unbundling). We seek to understand when ownership unbundling leads to lower customer prices, and formalize necessary conditions. In general, legal unbundling implies a less effective regulation, but it reduces the degree of market distortion caused by the difference between marginal costs and average costs (= regulated prices of network usage). We find that the necessary condition is not satisfied for realistic values of the relevant parameters, i.e. legal unbundling leads to lower costumer prices than ownership unbundling in most relevant markets.
Subjects: 
Unbundling
vertical integration
Cournot competition
JEL: 
L50
D61
D43
Document Type: 
Working Paper

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