, Volume 35, Issue 5, pp 449–464 | Cite as

Liberalisation, competition and ownership in the presence of vertical relations

Original Paper


This contribution analyses a market with an upstream bottleneck monopoly and a downstream activity that may either be vertically integrated or separated. Separation always reduces the consumer surplus, and the total surplus unless there are large cost reductions. Downstream competition from a public or private network monopoly would crowd out other firms, also when public ownership is associated with more modest objectives than welfare-maximisation. A market is therefore less likely to remain a mixed oligopoly than without vertical relations. However, private firms would survive in a moderately welfare-improving mixed oligopoly with cross-subsidisation and access charges equal to marginal costs.


Vertical separation Privatisation Liberalisation Mixed oligopoly 

JEL Classification

D43 L43 L44 



This contribution is part of the project Reforming Markets and Organisations, which is partly funded by the Academy of Finland (Research Grant 115003). I am grateful to the referee and editors of this journal, to a referee of a related paper, to Sonja Grönblom, Annica Karlsson, Tom Björkroth and other present or former members of my department’s research group in industrial organization, and to participants in European Network on Industrial Policy, 9th Annual Conference, Limerick, 19-22.2006. The usual disclaimers apply.


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© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  1. 1.Department of Economics and StatisticsÅbo Akademi UniversityTurkuFinland

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