Two-part access pricing and imperfect competition

This paper considers a vertically separated industry with an upstream monopolist who supplies an essential input to two downstream Cournot firms. This situation is relevant to a number of sectors, including the telecommunications industry where trunk operators must have access to the local network of an incumbent firm to provide their long-distance service. The paper analyses two-part access pricing and input price discrimination under different regulatory settings, and it finds that discrimination may produce adverse welfare effects when it is practised by the unregulated upstream firm.