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Title:Competition and regulation in a differentiated good market PDF Logo
Authors:Fiocco, Raffaele
Issue Date:2011
Series/Report no.:SFB 649 discussion paper 2011-084
Abstract:This paper addresses the issue of how to design the institutional structure of an industry which provides two differentiated products. One good is supplied by a regulated monopoly and the other is produced in a competitive (unregulated) segment. Two possible institutional patterns are compared. Under 'concentration' the regulated firm can enter the competitive segment by owning one firm which operates there (even though the two firms must be legally unbundled). The regime of 'separation' implies that regulated activities are totally unbundled from the unregulated ones, that is, common ownership is not allowed. When the regulator does not know the regulated monopoly's cost of production, we find that the pattern of separation improves (expected) social welfare as long as goods are substitutes. Conversely, concentration performs better in case of complementarity.
Subjects:competition
complementarity
concentration
regulation, separation, substitutability
JEL:D82
L11
L51
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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