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On Regulation and Competition: Pros and Cons of a Diversified Monopolist

Author

Listed:
  • Carlo Scarpa

    (University of Brescia)

  • Giacomo Calzolari

    (University of Bologna)

Abstract

We study the regulation of a firm which supplies a regulated service while also operating in a competitive, unregulated sector. If the firm conducts its activities in the two markets jointly, it enjoys economies of scope whose size is the firm’s private information, unknown either to the regulator or to the rival firms. We characterize the unregulated market outcome (with price and quantity competition) and optimal regulation that involves an informational externality to the competitors. Although joint conduct of the activities generates scope economies, it also entails private information, so that regulation is less efficient and the unregulated market too may be adversely affected. Nevertheless, we show that allowing the firm to integrate productions is (socially) desirable, unless joint production is characterized by dis-economies of scope.

Suggested Citation

  • Carlo Scarpa & Giacomo Calzolari, 2009. "On Regulation and Competition: Pros and Cons of a Diversified Monopolist," Working Papers 2009.55, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.55
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    References listed on IDEAS

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    1. Lewis, Tracy R & Sappington, David E M, 1989. "An Informational Effect When Regulated Firms Enter Unregulated Markets," Journal of Regulatory Economics, Springer, vol. 1(1), pages 35-45, March.
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    Citations

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    Cited by:

    1. Stroffolini, Francesca, 2012. "Access profit-sharing regulation with information acquisition and transmission," Research in Economics, Elsevier, vol. 66(2), pages 161-174.
    2. Elisabetta Ottoz & Marina Di Giacomo, 2012. "Diversification strategies and scope economies: evidence from a sample of Italian regional bus transport providers," Applied Economics, Taylor & Francis Journals, vol. 44(22), pages 2867-2880, August.

    More about this item

    Keywords

    Regulation; Competition; Asymmetric Information; Conglomerate Firms; Multiutility; Scope Economies; Informational Externality;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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