Market Regulation and Multimarket Rivalry
AbstractMultimarket contact between duopolists in an X and Y market is modelled with a trigger strategy. We show that mildly restrictive price-cap regulation in the X market decreases Y market quantities; but restrictive caps in the X market have a positive impact on Y market outputs. Behavior in laboratory markets confirms these propositions. Regulation that lowers X market prices by a small amount results in a statistically significant reduction in Y outputs. When the regulated X market price is reduced to the Cournot/Nash level, Y market outputs rise to a point statistically indistinguishable from the unregulated quantities.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 27 (1996)
Issue (Month): 3 (Autumn)
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- Leopold Soegner, 1998. "Regulation of a Complementary Imputed Good in a Competitive Environment," Department of Economics Working Papers wuwp056, Vienna University of Economics, Department of Economics.
- Daniel Cracau & Abdolkarim Sadrieh, 2014. "The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels," FEMM Working Papers 140003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
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