[en] A vertically integrated ﬁrm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both ﬁrms use the same essential input. The regulator’s objectives are (i) to ensure ﬁnancing of the essential input and (ii) to generate competition in the downstream market. The regulatory mechanism grants non-discriminatory access of the essential facility to the entrant provided it pays a two-part tariff to the incumbent. The optimal mechanism generates inefﬁcient entry. The inefﬁcient entry captures the trade-off between market efﬁciency and infrastructure ﬁnancing resulting from incomplete information and non-discriminatory access.
Centre de Recherche en Économie Publique et de la Population - C.R.E.P.P