Input Price Discrimination, Access Pricing, and Bypass

This paper explores several aspects of the vertical relationship between an upstream firm and a number of downstream firms that are Cournot rivals relying on the inputs provided by the upstream firm. We address the following questions: (i) if the upstream firm can charge different prices to different downstream firms, will it charge higher prices to more efficient firms? (ii) if the upstream firm can provide different levels of quality of access to several ex ante identical downstream firms, will it provide a uniform quality of access? The answer to (i) depends on whether downstream firms can self-supply. As for (ii), we show that equals may be treated unequally.
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