Should the emergence of multi-utilities be encouraged? A partial answer based on the information cost of regulation. Kristin Linnerud March 29, 2007 Abstract Bundling traditionally distinct services into a multi-utility may increase or decrease the problems faced by the regulator. I compare the harmonized regulation of two services across two industrial structures: a multi-utility sells both services and two utilities sell one service each. The regulator does not know the marginal cost of providing each service, and the market is charac- terized by supply-side and demand-side interdependencies. I nd that three parameters: correlation of costs, cross-price sensitivity of demand and social cost of public funds, will determine whether the information cost of regula- tion increases when the utility services are sold through a multi-utility. One interesting implication of the model is that a developed and a less developed country may reach di/erent conclusions as to whether the emergence of a multi-utility should be encouraged or not. JEL Classication: D82, L21, L51. Keywords: Multi-dimensional screening; Optimal organization of regulated industries. Sogn and Fjordane University College, Department of Economics and Languages, Fossvegen 6, 6856 Sogndal, Norway. E-mail: kristin.linnerud@hisf.no. Tel: 0047 57676344. Fax: 0047 57676301. 1