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

Abstract

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: https://ssrn.com/abstract=1135476

Giacomo Calzolari (Contact Author)

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

Villa la Fonte
Via delle fontanelle 18
San Domenico di Fiesole, Florence 50014
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna ( email )

Piazza Scaravilli 2
I-40126 Bologna
Italy

HOME PAGE: http://sites.google.com/view/giacomo-calzolari

Carlo Scarpa

University of Brescia ( email )

Via San Faustino 74B
Dipartimento di Scienze Economiche
25122 Brescia
Italy
+39+030+2988+833 (Phone)
+39+030+2988+839/840 (Fax)

NERA Economic Consulting ( email )

50 Main Street, 14th Floor
White Plains, NY 10606
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
441
PlumX Metrics