Domestic Regulation and International Trade

  • Øystein Foros
  • Hans Jarle Kind
  • Lars Sørgard


We consider the effects of a one-sided price regulation of one of two complementary inputs. The provider of the regulated input is a domestic firm, while the provider of the other input is a foreign firm. This describes the market structure for several digital information and communication services, where the regulated input is access while the non-regulated complementary input is content. We show that one-sided regulation may have negative welfare effects compared to a free market economy, unless the regulator has a first-mover advantage. In the latter case, regulation is welfare enhancing regardless of whether the foreign input provider uses linear or non-linear wholesale prices.


complementarities regulation strategic trade policy 

JEL Classification

L13 L51 L96 


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Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  • Øystein Foros
    • 1
  • Hans Jarle Kind
    • 1
  • Lars Sørgard
    • 1
  1. 1.Norwegian School of Economics and Business AdministrationBergenNorway

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