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What reforms might be necessary if lower access price is use

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The ECPR has been criticized because it preserves the incumbent's contribution from final good's sales lost to entrants and raises the access price to entrants. Some critics (Economides and White, 1995) argue that the ECPR is potentially inefficient since even an inefficient entrant could increase price competition in the final good, leading to lower prices and an expansion of output if the access price were lower. Why would a regulator set P I above marginal cost? Does the regulated vertically integrated firm necessarily benefit from the exercise of market power in the final-good market? What other reforms might be necessary if a lower access price is used? Why might lowering the price of access below that of the ECPR be a good idea?

Reference no: EM13874318

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