Regulating a Multi-Utility Firm

34 Pages Posted: 22 May 2008

See all articles by Giacomo Calzolari

Giacomo Calzolari

European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR); University of Bologna

Carlo Scarpa

University of Brescia; NERA Economic Consulting

Multiple version iconThere are 2 versions of this paper

Date Written: May 2007


We study the regulation of a utility firm which is active in a competitive unregulated sector as well. If the firm jointly operates its activities in the two markets, it enjoys economies of scope, whose size is the firm's private information and is unknown to the regulator and the rival firms. We jointly characterize the unregulated market outcome (with price and quantity competition) and also optimal regulation. Accounting for the several effects of regulation on the unregulated market, we show the existence of an informational externality, in that regulation provides useful information to the rival firms. Although joint operation of multi-utility's activities generates scope economies, it also brings about private information to the multi-utility, so that regulation is less efficient and also the unregulated market may be negatively affected. Nevertheless, we show that letting the multi-utility integrate productions is (socially) desirable, unless joint production is instead characterized by dis-economies of scope.

Keywords: Asymmetric information, competition, informational externality, multi-utility firms, regulation, scope economies

JEL Classification: L43, L51, L52

Suggested Citation

Calzolari, Giacomo and Scarpa, Carlo, Regulating a Multi-Utility Firm (May 2007). , Vol. , pp. -, 2007. Available at SSRN:

Giacomo Calzolari (Contact Author)

European University Institute - Economics Department (ECO) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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University of Bologna ( email )

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Carlo Scarpa

University of Brescia ( email )

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NERA Economic Consulting ( email )

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White Plains, NY 10606
United States

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