Paul A. Grout and In-Uck Park
"Promoting competition in the presence of essential facilities"
JEL codes: L15, L51
Keywords: access pricing, essential facilities, promoting competition

Abstract: This paper addresses how to use simple access pricing to promote entry in the presence of spillovers and essential facilities. An inherent dilemma is that the greater the spillover the greater is the benefit of attracting good entrants but the harder it is to exclude low quality entrants because they can free ride on the quality of good entrants. We show that the inability to discriminate between entrants has the effect of discouraging access prices that enable the low quality entrant to enter, generates a time consistency problem, and provides incentives for good quality entrants to limit their competitiveness.

Pre-publication pdf copy.