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Vertical Integration and Shared Facilities in Unregulated Industries

Keywords: Shared-facilities, Vertical integration, Foreclosure

In this paper we consider a market situation in which initially there is an unintegrated monopoly upstream that owns an important facility and two dowstream firms. Then the market is liberalized allowing upstream entry and vertical integration. The equilibrium entry mode–sharing the incumbent facility or building a new facility– is derived as well as the equilibrium market structure. Several policy prescriptions are set forth.

JEL Classification: D43, D61, L22, L13, L41, L42.