Regulation at Home, Competition Abroad: A Theoretical Framework

27 Pages Posted: 31 Jul 2001

See all articles by Carlo Scarpa

Carlo Scarpa

University of Brescia; NERA Economic Consulting

Giacomo Calzolari

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

Date Written: June 2001

Abstract

This paper analyses in a hidden characteristic set-up the design of the optimal price for a firm which is a monopolist at home but competes abroad against foreign firms. As long as diseconomies of scope are not too strong, the optimal price is identified. The price rule depends on the sign of the technological relationship between home output and foreign output. With economies of scope, the regulator should set a price below marginal cost, in order to help the firm in the foreign market, and vice-versa with diseconomies of scope. Informational asymmetry introduces a distortion in the price rule, which is usually amplified by the existence of a foreign market.

Keywords: Regulation, asymmetric information, multinational firms

JEL Classification: L51, L97, F23

Suggested Citation

Scarpa, Carlo and Calzolari, Giacomo, Regulation at Home, Competition Abroad: A Theoretical Framework (June 2001). FEEM Working Paper No. 39.2001. Available at SSRN: https://ssrn.com/abstract=278248 or http://dx.doi.org/10.2139/ssrn.278248

Carlo Scarpa (Contact Author)

University of Brescia ( email )

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Dipartimento di Scienze Economiche
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NERA Economic Consulting ( email )

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Giacomo Calzolari

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

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

University of Bologna ( email )

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I-40126 Bologna
Italy

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

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