Regulating Complementary Products: A Comparative Institutional Analysis
AbstractOptimal regulation, subject to informational constraints, is analyzed for industries for which production requires complementary inputs. An issue for regulatory policy is whether supply in these industries should be "bundled" or "unbundled." Bundled supply calls for regulation of an integrated industry. Unbundled supply has each component regulated separately. A main result is that unbundling introduces into regulation an additional component of information cost that is similar to "double marginalization" in the monopoly pricing of complementary products. Unbundling may be advantageous if it allows sufficient competition in nonmonopoly services, but the information cost can exceed the benefits of competition.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 26 (1995)
Issue (Month): 2 (Summer)
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Web page: http://www.rje.org
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- Pablo T. Spiller, 2008. "An Institutional Theory of Public Contracts: Regulatory Implications," NBER Working Papers 14152, National Bureau of Economic Research, Inc.
- Mohammad Arzaghi & Ernst Berndt & James Davis & Alvin Silk, 2009.
"Economic Factors Underlying the Unbundling of Advertising Agency Services,"
09-15, Center for Economic Studies, U.S. Census Bureau.
- Mohammad Arzaghi & Ernst R. Berndt & James C. Davis & Alvin J. Silk, 2008. "Economic Factors Underlying the Unbundling of Advertising Agency Services," NBER Working Papers 14345, National Bureau of Economic Research, Inc.
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