Regulation at Home, Competition Abroad: A Theoretical Framework
Data
01.01.2001
01.01.2001
Autori
Carlo Scarpa, Giacomo Calzolari
Codice JEL
L51,L97,F23
L51,L97,F23
Parole chiave:
Regulation,asymmetric information,multinational
Regulation,asymmetric information,multinational
Publisher
Economy and Society
Economy and Society
Editor
Fausto Panunzi
Fausto Panunzi
This paper analyses in a hidden characteristic set-up the design of the optimal price for a firm which is a monopolist at home but competes abroad against foreign firms. As long as diseconomies of scope are not too strong, the optimal price is identified. The price rule depends on the sign of the technological relationship between home output and foreign output. With economies of scope, the regulator should set a price below marginal cost, in order to help the firm in the foreign market, and vice-versa with diseconomies of scope. Informational asymmetry introduces a distortion in the price rule, which is usually amplified by the existence of a foreign market.