The Korean Economic Review
Pricing Third-Party Access to Essential Facilities under Asymmetric Information
Seok Yang (University of Seoul) and Myeonghwan Cho (University of Seoul)Year 2024Vol. 40No. 2
Abstract
We investigate a market wherein a dominant firm owns an essential facility and other firms use this facility by paying an access fee. Loss in social welfare occurs regardless of whether the cost of operating the essential facility is public or private information to the dominant firm. The government can improve social welfare by regulating the access fee, but it has limitations in improving social welfare when the cost of operating the essential facility is private information to the dominant firm. An appropriate tax-subsidy scheme can resolve the limitations by inducing the dominant firm to disclose its private information completely.