Price Discrimination,Separation and Access: Protecting Competition or Protecting Competitors?

Abstract

Refor M in utility industries often involves the owner of a key essential facility selling access to that facility to downstream competitors. Examples include local telephone access and transmission or distribution system access in gas and electricity. The access price is often set by a separate regulator, but downstream competitors may claim that the provider sells access at a lower price to its own down stream subsidiary This paper examines the basis for such claims. We show that a vertically integrated utility will have incentives to engage in price discrimination. However, this may not be anticompetitive Rather, price discrimination may lead to lower customer prices Depending on the entry policy that accompanies the industry refor Ms, price discrimination may raise or lower social welfare