Liberalisation, competition and ownership in the presence of vertical relations

Abstract

Vertical separation, Privatisation, Liberalisation, Mixed oligopoly, D43, L43, L44,

Privatization and Liberalization: Costs and Benefits in the Presence of Wage‐bargaining

“…Reduced internal rent capture is in fact often mentioned as a prominent motive for abandoning public monopolies (see for example Bradburd 1995), but there are other potential gains, such as reduced non‐wage costs, that our analysis has ignored. We have on the other hand addressed this issue in two companion papers that find even less of a positive impact than when there is internal rent capture (Willner and Parker 2007, Willner and Grönblom 2007). Other issues that need more attention are endogenous bargaining strengths and the possibility of dynamic efficiency, such as when new telecom‐services emerge after liberalization.…”

“…Such industries cannot be liberalized unless those activities where competition is possible, such as the generation and distribution of gas and electricity or the operation of trains, are separated from the upstream natural monopoly ( vertical separation ). It is well known that there are strong benefits related to vertical integration even if the monopoly is profit maximizing (Perry 1978, Vickers 1995, Kwoka 2002, Buehler 2005, Willner 2007). Competition in network industries is therefore based on the belief that reductions in production costs will overshadow the social costs of vertical separation (see Newbery 2001).…”

The organisation of services of general interest in Finland

“…All types of plants have been described as fairly productive, and some studies suggest that full liberalisation and Cournotcompetition might not reduce prices and increase welfare in such a market (Kopsakangas-Savolainen, 2003;Sulamaa, 2001: 117-29, 155-60). Moreover, an integrated public monopoly is likely to be superior in a network industry, in particular in the presence of agency problems or internal rent capture (see Willner, 2008;Grönblom and Willner, 2008;and Willner and Grönblom, 2013). Gugler et al (2014) suggests that vertical integration in the European electricity market would indeed mean cost savings of 13% for the median firm in their sample, and 15-20% for larger firms.…”

Reforming a network industry: consequences for cost efficiency and welfare

“…4. Partial vertical separation, and hence a downstream mixed oligopoly is dealt with in a companion paper, which assumes exogenous marginal costs and asks by how much they would have to be reduced so as to overshadow the benefits of vertically integrated profitor welfare-maximising monopoly (Willner 2008). 5.…”