TY - GEN
T1 - Can Vertical Separation Reduce Non-Price Discrimination and Increase Welfare?
AU - Brito, Duarte Miguel Machado Carneiro de
AU - Pereira, Pedro
AU - Vareda, João
PY - 2010
Y1 - 2010
N2 - We investigate if vertical separation reduces non-price discrimination and increases welfare. Consider an industry consistingof a vertically integrated firm and a retail entrant. The entrant requires access to the vertically integrated firm's wholesaleservices. The entrant and the vertically integrated firm's retailer sell horizontally and vertically differentiated products. Thewholesaler can degrade the quality of input it supplies to either of the retailers. We show that separation of the verticallyintegrated firm can, but need not, reduce discrimination against the entrant. Furthermore, with separation, the wholesaler maydiscriminate against the incumbent's retailer. Vertical separation impacts social welfare through two effects. First, through thedouble-marginalization effect, which is negative. Second, through the discrimination effect, which can be positive ofnegative. Hence, the net welfare impact of vertical separation is negative or potentially ambiguous.
AB - We investigate if vertical separation reduces non-price discrimination and increases welfare. Consider an industry consistingof a vertically integrated firm and a retail entrant. The entrant requires access to the vertically integrated firm's wholesaleservices. The entrant and the vertically integrated firm's retailer sell horizontally and vertically differentiated products. Thewholesaler can degrade the quality of input it supplies to either of the retailers. We show that separation of the verticallyintegrated firm can, but need not, reduce discrimination against the entrant. Furthermore, with separation, the wholesaler maydiscriminate against the incumbent's retailer. Vertical separation impacts social welfare through two effects. First, through thedouble-marginalization effect, which is negative. Second, through the discrimination effect, which can be positive ofnegative. Hence, the net welfare impact of vertical separation is negative or potentially ambiguous.
KW - Vertical Separation
KW - Non-Price Discrimination
KW - Welfare
KW - Next Generation Networks
M3 - Conference contribution
SN - 9772177385006
VL - 2
T3 - Papers from the 4 th ACORN-REDECOM Conference
SP - 359
EP - 394
BT - Proceedings of the ACORN-REDECOM Conference 2010
A2 - Aranha, Marcio Iorio
PB - ACORN-REDECOM - Americas Information and Communication Research Network
T2 - 4th ACORN-REDECOM Conference
Y2 - 14 May 2010 through 15 May 2010
ER -