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Informative Externalities and Pricing in Regulated Multiproduct Industries

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  • Iossa, Elisabetta

Abstract

This paper addresses the issue of how to organize a two-product industry with interdependent demands when the regulator cannot observe the demand level of the goods produced. Two industry structures are compared: a multiproduct monopoly, in which an informed firm produces both goods, and a differentiated duopoly, where two firms control one good each but the level of demand is known by one firm only. Focusing on the informative costs of regulation, the paper shows that, if goods are substitutes, the regulator may achieve a better performance through integration of production. With complements, instead, decentralization tends to be preferred. Copyright 1999 by Blackwell Publishing Ltd

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  • Iossa, Elisabetta, 1999. "Informative Externalities and Pricing in Regulated Multiproduct Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 195-219, June.
  • Handle: RePEc:bla:jindec:v:47:y:1999:i:2:p:195-219
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    Cited by:

    1. Carlo Scarpa & Giacomo Calzolari, 2009. "On Regulation and Competition: Pros and Cons of a Diversified Monopolist," Working Papers 2009.55, Fondazione Eni Enrico Mattei.
    2. Giacomo Calzolari & Carlo Scarpa, 2016. "Conglomerates And Regulation," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1648-1669, July.
    3. Raffaele Fiocco, 2012. "Competition and regulation with product differentiation," Journal of Regulatory Economics, Springer, vol. 42(3), pages 287-307, December.
    4. Raffaele Fiocco & Dongyu Guo, 2015. "Mergers between regulated firms with unknown efficiency gains," Review of Economic Design, Springer;Society for Economic Design, vol. 19(4), pages 299-326, December.
    5. Alessandro Sembenelli & Davide Vannoni, 2001. "Market Structures with Multi-product Firms: Welfare Analysis and Policy Implications," Journal of Industry, Competition and Trade, Springer, vol. 1(2), pages 161-179, June.
    6. Calzolari, Giacomo & Scarpa, Carlo, 2007. "Regulating a Multi-Utility Firm," CEPR Discussion Papers 6238, C.E.P.R. Discussion Papers.
    7. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    8. Sergei Severinov, 2008. "The value of information and optimal organization," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 238-265.

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