nep-ind New Economics Papers
on Industrial Organization
Issue of 2008‒01‒26
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. EU Regulation and Competition Policy among the Energy Utilities By Richard Green
  2. Price Variation Antagonism and Firm Pricing Policies By Pascal Courty; Mario Pagliero
  3. A contribution of experimental economics toward characterization of the use of market power in oligopolisitc markets By Fabien Petit; Yannick Phulpin; Marcelo Saguan; Philippe Dessante

  1. By: Richard Green
    Abstract: The energy utilities – gas and electricity companies – were traditionally regulated monopolies, but once the EU decided to liberalise them, competition policy became applicable. The EU has used a series of Directives to set out the framework for a market-led energy sector, with third party access to the transmission and distribution networks, and a choice of retailer for all customers, although these depend upon the agreement of Member States. The Commission has been able to take action directly when ruling on mergers in the sector, and in several cases has obtained concessions that should increase the level of competition as a condition for allowing a merger. This is a reactive approach, however, and problems remain in the sector, as shown by the 2005-7 sector enquiry. The proposed third energy package may remove some of the barriers to effective liberalisation.
    Keywords: Competition Policy, mergers, electricity, gas, liberalisation
    JEL: L43 L94 L95
    Date: 2007–12
  2. By: Pascal Courty; Mario Pagliero
    Abstract: Pricing schemes that vary prices in response to demand shocks may antagonize consumers and reduce demand. At the same time, consumers may take advantage of the opportunities offered by price changes. Overall, the net impact of varying price on demand is ambiguous. We investigate the issue empirically, exploiting a unique dataset from a firm that has experimented with different pricing schemes. Each scheme is characterized by how much prices respond to demand variations. Holding average price and other variables constant, we find that demand is higher when prices vary more. The evidence suggests that the antagonism effect cannot be first order.
    Keywords: Consumer demand, responsive pricing, fairness
    JEL: D01 D12 L86
    Date: 2008
  3. By: Fabien Petit (SUPELEC-Campus Gif - SUPELEC); Yannick Phulpin (SUPELEC-Campus Gif - SUPELEC); Marcelo Saguan (SUPELEC-Campus Gif - SUPELEC); Philippe Dessante (SUPELEC-Campus Gif - SUPELEC)
    Abstract: Despite the numerous researches about imperfect competition, the market power remains difficult to quantify using traditional economics methods. In this paper, we propose an experimental economics design and outline some ways of analysis of its results toward characterization of the use of market power. A simple system with two regions and a limited interconnection transfer capacity allocated by an implicit auction is studied. Depending on the experiments two or three subjects share equitably the production capacity in one region, while the production capacity is equitably shared among 5 subjects leading to a more competitive situation in the second one. In both regions, we observe a market price that is different from the theoretical results allowing a quantification of the use of market power. Results are also analyzed based on a characterization of the subjects’ behaviour. Further the impact of subjects’ behaviour on the market price evolution is described.
    Keywords: experimental economics, market power, electricity markets, oligopolistic markets
    Date: 2007–06–13

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