On Regulation and Competition: Pros and Cons of a Diversified Monopolist
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.
|Date of creation:||Jul 2009|
|Contact details of provider:|| Postal: Corso Magenta, 63 - 20123 Milan|
Web page: http://www.feem.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sakai, Yasuhiro, 1985. "The value of information in a simple duopoly model," Journal of Economic Theory, Elsevier, vol. 36(1), pages 36-54, June.
- Iossa, Elisabetta, 1999.
"Informative Externalities and Pricing in Regulated Multiproduct Industries,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 47(2), pages 195-219, June.
- Elisabetta Iossa, 1999. "Informative externalities and pricing in regulated multiproduct industries," ULB Institutional Repository 2013/191941, ULB -- Universite Libre de Bruxelles.
- Giovanni Fraquelli & Massimiliano Piacenza & Davide Vannoni, 2004. "Scope and scale economies in multi-utilities: evidence from gas, water and electricity combinations," Applied Economics, Taylor & Francis Journals, vol. 36(18), pages 2045-2057.
- Sappington, David E. M., 2003. "Regulating horizontal diversification," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 291-315, March.
- Berry, S Keith, 2000. "Excess Returns in Electric Utility Mergers during Transition to Competition," Journal of Regulatory Economics, Springer, vol. 18(2), pages 175-188, September.
- 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.
- Chaaban, J.M., 2004. "Partial Regulation and cost allocation in multimarket utilities," Economics Working Paper Archive (Toulouse) 54, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
- Calzolari, Giacomo, 2001. "The Theory and Practice of Regulation with Multinational Enterprises," Journal of Regulatory Economics, Springer, vol. 20(2), pages 191-211, September.
- Giacomo Calzolari & Carlo Scarpa, 2009.
"Footloose Monopolies: Regulating a "National Champion","
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 18(4), pages 1179-1214, December.
- Calzolari, Giacomo & Scarpa, Carlo, 2007. "Footloose Monopolies: Regulating a "National Champion"," CEPR Discussion Papers 6413, C.E.P.R. Discussion Papers.
- Calzolari, Giacomo & Pavan, Alessandro, 2006.
"On the optimality of privacy in sequential contracting,"
Journal of Economic Theory,
Elsevier, vol. 130(1), pages 168-204, September.
- Giacomo Calzolari & Alessandro Pavan, 2004. "On the Optimality of Privacy in Sequential Contracting," Discussion Papers 1394, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- 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.
- Alessandro Pavan, 2004. "On the Optimality of Privacy in Sequential Contracting," Theory workshop papers 658612000000000067, UCLA Department of Economics.
- Jean Tirole & Jean-Jaques Laffont, 1985.
"Using Cost Observation to Regulate Firms,"
368, Massachusetts Institute of Technology (MIT), Department of Economics.
- Leggio, Karyl B & Lien, Donald, 2000. "Mergers in the Electric Utility Industry in a Deregulatory Environment," Journal of Regulatory Economics, Springer, vol. 17(1), pages 69-85, January.
- John Vickers, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 1-17.
- Ronald R. Braeutigam & John C. Panzar, 1989. "Diversification Incentives under "Price-Based" and "Cost-Based" Regulation," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 373-391, Autumn.
- de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, September.
- Brennan, Timothy J, 1990. "Cross-Subsidization and Cost Misallocation by Regulated Monopolists," Journal of Regulatory Economics, Springer, vol. 2(1), pages 37-51, March.
- Brennan, Timothy J & Palmer, Karen, 1994. "Comparing the Costs and Benefits of Diversification by Regulated Firms," Journal of Regulatory Economics, Springer, vol. 6(2), pages 115-136, May.
- Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2009.55. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.