Vertical Integration and Sabotage in Regulated Industries

Self-Sabotage

“…The quality (q) of the input produced by the VIP determines the quality (q v ) of its own downstream product and the quality (q r ) of the rival's product. The input quality affects the 21 This conclusion parallels the insights provided in Biglaiser and DeGraba (2001), Mandy (2001), Beard et al (2001), and Bustos and Galetovic (2003). 22 This conclusion might be viewed as a corollary of Reiffen's (1998) observation that the sabotage of rivals can be associated with lower operating costs for the VIP.…”

“…8 The VIP's upstream marginal cost is c u . The VIP sells the input to its downstream rivals at unit price w. We will write each rival's 5 See Biglaiser and DeGraba (2001), Mandy (2001), Beard et al (2001), and Bustos and Galetovic (2003) for related insights with regard to the direct, asymmetric sabotage of rivals. 6 Appendix A provides the proofs of all propositions and corollaries stated in the text.…”

“…8 For simplicity, we do not model formally any economies of scope that may exist between the VIP's upstream and downstream operations. Bustos and Galetovic (2003) provide a useful analysis of the effects of scope economies.…”

Regulating Service Quality: A Survey

“…Bernheim and Willig (1996), for example, for a more detailed discussion of the means by which vertically-integrated telecommunications suppliers can reduce wholesale service quality in order to secure a competitive advantage in their retail operations. 56 See, for example, Economides (1998), Mandy (2000, Beard et al (2001), Bustos and Galetovic (2003), and Kondaurova and Weisman (2003). 57 See, for example, Weisman (1995) and Sibley and Weisman (1998).…”

Open access policies, regulated charges and non-price discrimination in telecommunications

“…3 Ultimately, the incumbent's incentives to implement a non-price discrimination strategy are intimately bound to the regulated access price level. Beard et al (2001), Bustos and Galetovic (2003), Economides (1998), Sibley and Weisman (1998), Mandy (2000), 4 Mandy and Sappington (2007) -cost and demand sabotage, Weisman and Kang (2001), Mattos (2002Mattos ( , 2007, Laffont and Tirole (2000), Sappington and Weisman (2005) -self sabotage -and Sand (2004) explore non-price discrimination in vertically integrated companies providing inputs to downstream competitors. In general, the authors restrict their analyses to specific hypotheses about market strategic interdependence (Cournot or Bertrand) and demand format (mainly linear demand).…”