We develop a partial equilibrium, perfectly competitive framework of a (potentially) vertically integrated industry. There are three types of firms: upstream firms that use primary factors to produce an intermediate; downstream firms that use primary factors and intermediates to produce a final...

This paper proposes a regulatory mechanism for vertically related industries in which the upstream “bottleneck” segment faces significant returns to scale while other (downstream) segments may be more competitive. In the proposed mechanism, the ownership of the upstream firm is allocated to...