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.
Similar content being viewed by others
References
Ballard, C., J. Shoven, and J. Whalley. 1985. “General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States.” American Economic Review 75(1): 128-138.
Boldron, F., and C. Hariton. 2000. “Rent Extraction by an Unregulated Essential Facility.” Working paper 20.07.538, University of Toulouse (Gremaq).
Hariton, C. 2002. “Gestion et Réglementation des Infrastructures”, PhD Dissertation, University of Toulouse (Gremaq).
Laffont, J.-J., and J. Tirole. 1993. A Theory of Incentives in Procurement and Regulation. Cambridge, MA: Massachussets Institute of Technology Press.
Segal, I. R. 1998. “Monopoly and Soft Budget Constraint.” Rand Journal of Economics 29(3): 596–609.
Tirole, J. 1988. The Theory of Industrial Organization. Cambridge, MA: Massachussets Institute of Technology Press.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Boldron, F., Hariton, C. Rent Extraction by an Unregulated Essential Facility. Journal of Regulatory Economics 22, 85–95 (2002). https://doi.org/10.1023/A:1019955803432
Issue Date:
DOI: https://doi.org/10.1023/A:1019955803432