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Price Discrimination, Separation and Access: Protecting Competition or Protecting Competitors?
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Stephen P. King
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Abstract
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Reform in utility industries often involves the owner
of a key essential facility selling access to that
facility to downstream competitors. Examples include
local telephone access and transmission or
distribution system access in gas and electricity. The
access price is often set by a separate regulator,
but downstream competitors may claim that the
provider sells access at a lower price to its own
downstream subsidiary. This paper examines the basis for
such claims. We show that a vertically integrated
utility will have incentives to engage in price
discrimination. However, this may not be
anticompetitive. Rather, price discrimination may lead
to lower customer prices. Depending on the
policy that accompanies the industry reforms,
price discrimination may raise or lower social welfare.
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Download this article.
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Keywords
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ACCESS PRICING; VERTICAL INTEGRATION; INPUT MONOPOLY;
PRICE DISCRIMINATION; TELECOMMUNICATIONS.
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Contact Details
Stephen P. King
Department of Economics
The University of Melbourne
Parkville VIC 3052
E-mail: s.king@ecomfac.unimelb.edu.au
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I would like to thank Joshua Gans, an
anonymous referee and seminar
participants at the University of
Adelaide, the University of Melbourne,
and the Australian Competition and
Consumer Commission for their
useful comments.
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