Informative Externalities and Pricing in Regulated Multiproduct Industries
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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Volume (Year): 47 (1999)
Issue (Month): 2 (June)
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