We analyze the welfare effects of parity rules, prevalent in telecommunications and other regulated industries, that force a vertically-integrated input monopolist to treat its own downstream affiliate and downstream competitors comparably in terms of input price and quality. When input pricing...

We analyze the welfare effects of “parity” rules that force a vertically-integrated input monopolist (VIM) to treat downstream affiliates and competitors alike in terms of price and quality. We find that input-quality parity can lower social welfare when input pricing is unregulated. In...