Economics, Econometrics and Finance
4 years ago

New regulatory mechanism boosts efficiency in vertically related industries

RePEc: Research Papers in Economics
Bottleneck co-ownership as a regulatory alternative
Federico Boffa, John C. Panzar

Paper Summary

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The article suggests a new way to regulate industries where one part has big economies of scale. By letting the downstream companies own part of the upstream company based on how much they buy, it can keep competition downstream while still benefiting from scale. This method is better than having the upstream company set prices at average cost.