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v1 (2009-12-09)

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Upstream Competition between Vertically Integrated Firms

Marc Bourreau 1, 2, Johan Hombert 2, 3, Jérôme Pouyet 4, 5, 6, Nicolas Schutz 4, 5

(2009-12-09)

We propose a model of two-tier competition between vertically integrated firms and unintegrated downstream firms. We show that, even when integrated firms compete in prices to offer a homogeneous input, the Bertrand result may not obtain, and the input may be priced above marginal cost in equilibrium, which is detrimental to consumers' surplus and social welfare. We obtain that these partial foreclosure equilibria are more likely to exist when downstream competition is fierce. We then use our model to assess the impact of several regulatory tools in the telecommunications industry.

1:	Institut Télécom - Télécom ParisTech
	Télécom ParisTech
2:	Centre de Recherche en Économie et Statistique (CREST)
	INSEE – École Nationale de la Statistique et de l'Administration Économique
3:	École Nationale de la Statistique et de l'Administration Économique (ENSAE)
	ENSAE ParisTech
4:	Department of Economics, Ecole Polytechnique
	CNRS : UMR7176 – Polytechnique - X
5:	Ecole d'Économie de Paris - Paris School of Economics (EEP-PSE)
	Ecole d'Économie de Paris
6:	CEPR
	(-)

Subject

:

Humanities and Social Sciences/Business administration Humanities and Social Sciences/Economies and finances

Keyword(s): Vertical foreclosure – vertically-related markets – telecommunications.

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From: Department Of Economics <>

Submitted on: Wednesday, 9 December 2009 14:35:10

Updated on: Wednesday, 7 July 2010 09:19:47