Abstract

This note shows a two-stage game describing a configuration of two vertical monopolies in a local public utility where there is a upstream firm selling an input to a downstream firm who provides a public service to a local community at a regulated tariff. The possibility for the local public administration owning the first firm to discretionally set the price of input (access or rent) rises a problem of double marginalization which requires a further form of regulation carried on by a specific local authority, somewhat independent by local municipalities themselves. The problem is discussed within the new Italian legislation disciplining the various forms of selection of the public service providers.