Wednesday, June 29, 2016

Upstream Competition and Open Access Regimes: Experimental Evidence

Horstmann, Niklas ; Kramer, Jan ; Schnurr, Daniel offer Upstream Competition and Open Access Regimes: Experimental Evidence.

ABSTRACT: We investigate the effects of alternative open access regimes on market performance. In particular, by means of an economic laboratory experiment we compare the market outcomes under unregulated wholesale competition, under a price-fixing rule (where firms must maintain their wholesale price for a fixed period of time), and under a margin squeeze rule (where the retail price of integrated firms must exceed their wholesale price). Our analysis suggests that wholesale and retail prices are substantially reduced by the introduction of a price-fixing rule at the upstream level compared to the unregulated scenario. In contrast, we do not find evidence that a margin squeeze regulation reduces retail market prices. In fact, while such a rule benefits the reselling firm by allowing for a viable profit margin, prices for consumers tend to be even higher than in the unregulated case.

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