Footloose Monopolies: Regulating a 'National Champion'
University of Bologna
University of Brescia; NERA Economic Consulting
CEPR Discussion Paper No. DP6413
We analyze the design of optimal regulation of a domestic monopolist that also competes in an unregulated foreign market. We show how foreign activities by the regulated firm affect domestic regulation, consumers' surplus and firm's profits. Although expansion in unregulated foreign markets amplifies the regulatory 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 and we analyze if and when the firm's decision to expand abroad does in fact coincide with consumers' interests in the regulated market.
Number of Pages in PDF File: 38
Keywords: Foreign Competition, Multinational Enterprises, National Champions, Regulation
JEL Classification: F23, L51
Date posted: May 29, 2008