We analyze the design of optimal regulation of a domestic monopolist that also competes in an unregulated foreign market. We show how foreign activities by the regulated firm affect domestic regulation, consumers’ surplus and firm’s profits. Although expansion in unregulated foreign markets amplifies the regulatory distortions that are caused by the regulator’s limited information, we also show that allowing the firm to compete abroad does not necessarily harm domestic consumers and we analyze if and when the firm’s decision to expand abroad does in fact coincide with consumers’ interests in the regulated market.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
6413.
Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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