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Safe harbor input prices and market exclusion

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  • Dennis Weisman

Abstract

An essential input price that is “too high” relative to the downstream price leads to inefficient foreclosure and one that is “too low” induces the vertically-integrated firm to engage in non-price discrimination. Displacement ratios are used to derive the range of safe harbor (downstream/upstream) margin ratios within which no market exclusion arises in equilibrium. The range of admissible margin ratios is increasing in the degree of product differentiation and reduces to a single ratio in the limit as the products become homogeneous. A key policy finding is that complementary price-ceiling and price-floor constraints can prevent both forms of market exclusion. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Dennis Weisman, 2014. "Safe harbor input prices and market exclusion," Journal of Regulatory Economics, Springer, vol. 46(2), pages 226-236, October.
    • Handle: RePEc:kap:regeco:v:46:y:2014:i:2:p:226-236
    DOI: 10.1007/s11149-014-9255-x
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    References listed on IDEAS

    as
    1. David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
    2. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    3. Mandy, David M, 2000. "Killing the Goose That May Have Laid the Golden Egg: Only the Data Know Whether Sabotage Pays," Journal of Regulatory Economics, Springer, vol. 17(2), pages 157-172, March.
    4. Sibley, David S. & Weisman, Dennis L., 1998. "Raising rivals' costs: The entry of an upstream monopolist into downstream markets," Information Economics and Policy, Elsevier, vol. 10(4), pages 451-470, December.
    5. repec:bla:jindec:v:49:y:2001:i:3:p:319-33 is not listed on IDEAS
    6. T. Randolph Beard & David L. Kaserman & John W. Mayo, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-333, September.
    7. Weisman, Dennis L., 2001. "Access pricing and exclusionary behavior," Economics Letters, Elsevier, vol. 72(1), pages 121-126, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Input prices; Vertical integration; Foreclosure ; Sabotage; L51; L96;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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