Wholesale Access in Multi-Firm Markets: When is it Profitable to Supply a Competitor?
43 Pages Posted: 14 Dec 2006
Date Written: December 2006
We address the question whether and on what conditions will an access-seeker be provided with access to a necessary input. We study this question in a model in which multiple vertically-integrated firms - potential access providers - compete. Although it might seem in such a setting that competition for the business of the potential access-seeker will invariably lead to the provision of the necessary input on terms that are sufficiently attractive to induce entry, we find that whether access is provided depends on whether the firms' inputs are homogeneous or differentiated, whether diversion to the entrant's product impacts incumbent firms proportionally or differentially, and whether the entrant can commit to the positioning of its product ex-ante. Our results have implications for policy makers who must decide whether to intervene in access markets.
Keywords: Access pricing, Regulation, Vertical integration
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