10.18452/4334
Fiocco, Raffaele
Scarpa, Carlo
The Regulation of Interdependent Markets
Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
2011
regulation
lobbying
asymmetric information
energy markets
330 Wirtschaft
Humboldt-Universität zu Berlin
Humboldt-Universität zu Berlin
2017-06-16
2017-06-16
2011-08-09
2011-07-28
2011-07-28
1860-5664
http://edoc.hu-berlin.de/18452/4986
urn:nbn:de:kobv:11-100190518
2195055-6
We examine the issue of whether two monopolists which produce substitutable goods should be regulated by one (centralization) or two (decentralization) regulatory authorities, when the regulator(s) can be partially captured by industry. Under full information, two decentral- ized agencies - each regulating a single market - charge lower prices than a unique regulator, making consumers better off. However, this leads to excessive costs for the taxpayers who subsidize the …rms, so that centralized regulation is preferable. Under asymmetric informa- tion about the firms' costs, lobbying induces a unique regulator to be more concerned with the industry's interests, and this decreases social welfare. When the substitutability between the goods is high enough, the firms'lobbying activity may be so strong that decentralizing the regulatory structure may be social welfare enhancing.