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Footloose Monopolies: Regulating a "National Champion"

  • Calzolari, Giacomo
  • Scarpa, Carlo

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.

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Date of creation: Aug 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6413
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  1. Giacomo Calzolari & Alessandro Pavan, 2005. "On the Optimality of Privacy in Sequential Contracting," Discussion Papers 1404, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  3. Helm, Dieter & Jenkinson, Tim, 1997. "The Assessment: Introducing Competition into Regulated Industries," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 1-14, Spring.
  4. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  5. Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
  6. Stephen Martin & Paola Valbonesi, 2006. "State Aid to Business," Chapters, in: International Handbook on Industrial Policy, chapter 7 Edward Elgar.
  7. Vickers, John, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 1-17, January.
  8. Timothy Besley & Paul Seabright, 1999. "The effects and policy implications of state aids to industry: an economic analysis," Economic Policy, CEPR;CES;MSH, vol. 14(28), pages 13-53, 04.
  9. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
  10. Giacomo Calzolari, 2004. "Incentive Regulation of Multinational Enterprises," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 257-282, 02.
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