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Rent Extraction by an Unregulated Essential Facility

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  • Boldron, Francois
  • Hariton, Cyril

Abstract

This paper shows that consumers may benefit when a regulator chooses not to regulate a final product in an industry characterized by an unregulated essential facility sold through non-linear tariffs. Two main reasons drive this result. First, the regulator maximizes social welfare and values the final good production more than the producer itself. Second, the regulator has access to an extra source of financing with the public funds. Therefore, the essential facility seller can ask more of the regulator than of the final good producer. Copyright 2002 by Kluwer Academic Publishers

Suggested Citation

  • Boldron, Francois & Hariton, Cyril, 2002. "Rent Extraction by an Unregulated Essential Facility," Journal of Regulatory Economics, Springer, vol. 22(1), pages 85-95, July.
    • Handle: RePEc:kap:regeco:v:22:y:2002:i:1:p:85-95
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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