Regulating national firms in a common market under asymmetric information
Economic Modelling, 2018, vol. 68, issue C, 450-460
In a supranational common market, national regulation can produce inefficiencies. National regulators typically care only for domestic welfare and they tend to push national firms in the common market. When information about production costs is held privately by firms and is unknown to the regulator, competition between national and foreign firms can help to reduce the information rents captured by national producers and thus increase efficiency. This is more likely when the production costs of national and foreign firms are highly correlated, for instance because firms use similar technologies. In other cases, market share rivalry pushes national regulators to inefficiently expand the production of national firms, also increasing the information rents. When the ex-ante uncertainty of the production costs is high, the creation of a common market is more likely to increase expected welfare, as compared to separated national markets.
Keywords: Regulation; Competition; Market integration; Asymmetric information; Cost of public funds (search for similar items in EconPapers)
JEL-codes: L43 L51 F15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:68:y:2018:i:c:p:450-460
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Series data maintained by Dana Niculescu ().