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Informative Externalities and Pricing in Regulated Multiproduct Industries
Author(s) -
Iossa Elisabetta
Publication year - 1999
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00097
Subject(s) - duopoly , monopoly , externality , interdependence , industrial organization , microeconomics , product (mathematics) , production (economics) , decentralization , regulator , economics , product differentiation , marginal cost , control (management) , vertical integration , business , market economy , cournot competition , biochemistry , chemistry , geometry , mathematics , management , political science , law , gene
This paper addresses the issue of how to organise a two‐product industry with interdependent demands when the regulator cannot observe the demand level of the goods produced. Two industry structures are compared: a multiproduct monopoly, in which an informed firm produces both goods, and a differentiated duopoly, where two firms control one good each but the level of demand is known by one firm only. Focusing on the informative costs of regulation, the paper shows that, if goods are substitutes, the regulator may achieve a better performance through integration of production. With complements, instead, decentralisation tends to be preferred.