Footloose Monopolies: Regulating a 'National Champion'
University of Bologna - Department of Economics; Centre for Economic Policy Research (CEPR)
University of Brescia; Fondazione Eni Enrico Mattei (FEEM), Milan
Journal of Economics & Management Strategy, Vol. 18, Issue 4, pp. 1179-1214, Winter 2009
We analyze the design of optimal regulation of a domestic monopolist that also competes in an unregulated foreign market. We show how foreign activities affect regulation, consumers' surplus, national welfare, and firm's profits. Although expansion in unregulated foreign markets amplifies the 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. We analyze if and when the firm's decision to expand abroad coincides with national interests.
Number of Pages in PDF File: 36Accepted Paper Series
Date posted: October 26, 2009
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