Munich Personal RePEc Archive

Optimal capacity allocation in a vertical industry

Antelo, Manel and Bru, Lluís (2022): Optimal capacity allocation in a vertical industry.

[thumbnail of MPRA_paper_113984.pdf]

Download (351kB) | Preview


We examine how a social planner should allocate productive capacity in a downstream industry when, upstream, there is an efficient supplier and a set of less efficient suppliers of an essential input. We show that optimal allocation consists of setting a large quota and small quotas for the remaining capacity. This allows the planner, without necessarily harming consumers, to reap licensing rents above those that would be obtained in a competitive downstream market or under public management of capacity. We also discuss circumstances under which a use-or-lose requirement for the large quota is welfare enhancing or welfare reducing, and under which banning price discrimination in the intermediate market may be socially optimal.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.